PRAYERS

[Mr. SPEAKER in the Chair]

MESSAGE FROM COSTA RICAN CONGRESS

Mr. Speaker: I have to inform the House that I have received a cablegram from the President of the Costa Rican Congress, which reads as follows:

6th June.

"The Costa Rican Congress, to-day, resolved to send to the Heads of State and Parliaments of the Allied Nations, fighting for Democracy, a message of encouragement and affection, on the occasion of the invasion of the European Continent, begun to-day.

(Signed) JOSE ALBERTAZZI AVENDANO, President of the Costa Rican Congress."

The House will desire me to send a suitable reply.

Hon. Members: Hear, hear.

Oral Answers to Questions — ETHIOPIA

Mr. Mander: asked the Secretary of State for Foreign Affairs whether steps are being taken to substitute a new agreement with the Emperor of Ethiopia in place of the Military Convention of Agreement of 1942; what progress has been made; and whether he will bear in mind the advisability of relating the future of Ethiopia to the New World Organisation.

The Secretary of State for Foreign Affairs (Mr. Eden): The present position is that notice of termination of the Anglo-Ethiopian Agreement and Military Convention, provided for in Article 12 of the Agreement, was given by the Emperor to His Majesty's Chargé d'Affaires on 25th May. In these circumstances it has been necessary, for His Majesty's Government to review their position, and they are doing so with the assistance of His Majesty's

Minister, who had already reached this country on my invitation, for consultation.

Mr. Mander: Would not my right hon. Friend agree that, as soon as practicable, responsibilities, financial and otherwise, should be placed on as broad shoulders as possible, and not confined to this country?

Mr. Eden: I am always in favour of financial responsibility being widely spread.

Oral Answers to Questions — PERMANENT COURT OF INTERNATIONAL JUSTICE

Mr. Mander: asked the Secretary of State for Foreign Affairs what steps it is proposed to take to carry into effect the recommendations of the informal Inter-Allied Committee on the future of the Permanent Court of International Justice (Cmd. 6531); and, in view of recommendation 137 with regard to justiciable disputes, what machinery it is proposed to consider for settling non-justiciable disputes, such as by establishing a tribunal in equity.

Mr. Eden: The report of the Committee has been communicated to the Governments of the United Nations for consideration. His Majesty's Government in the United Kingdom have offered to receive and circulate such observations as any of them may desire to make on the report, and the question of the action to be taken will then be one to be decided by consultation between the United Nations. The method of settling non-justiciable disputes will presumably fall to be considered in connection with the future organisation for the maintenance of peace.

Oral Answers to Questions — "EUROPEAN CLAIMS, LIMITED" (WARNING)

Earl Winterton: asked the Secretary of State for Foreign Affairs if it was with his authority that a company, named "European Claims, Limited," issued a circular stating that the body in question will assist claimants in the preparation and conduct of all types of claim arising from the spoliation of Europe by the Nazi régime for a commission on the amounts recovered; and if he will give an assurance that no official assistance will be given to this company.

Mr. Eden: My attention has been drawn to the circular in question. understand that the avowed object of this company is to act as agents for the investigation, assessment and preparation of claims of every description, and that it offers to prosecute claims on payment of fees by way of commission on amounts recovered or otherwise and to undertake or advise as regards the lodgment of such claims on behalf of refugees and others who have suffered losses as a result of the present war. I am glad to have this opportunity of issuing a warning in this House against dealing with persons or companies who issue advertisements or notices of this nature, and to state that His Majesty's Government are entirely opposed to international claims being dealt with by any persons or bodies on a commission basis, or any similar basis. The objection to the assessment and presentation of international claims on any such basis is similar to the objection to the assessment and presentation in this way of claims before municipal courts, which I am advised is illegal under the law of this country. The Foreign Office, who are as a rule responsible for the presentation of international claims, will refuse to accept claims put forward through persons or bodies acting in such conditions as are specified in this circular. Claimants who require professional and legal assistance in the preparation and presentation of their claims should, in their own interest, have recourse to qualified professional and legal practitioners, who will receive remuneration for their services in accordance with the well-established rules of their professions.

Mr. Ellis Smith: Is not this solely a question of Government responsibility? If any action has been taken which is contrary to the interests of the people concerned, should not the case be sent to the Director of Public Prosecutions?

Mr. Eden: I thought this warning would, perhaps, be timely and adequate.

Mr. George Griffiths: And if not, what then?

Oral Answers to Questions — SWISS GOVERNMENT (NEUTRAL SERVICES)

Earl Winterton: asked the Secretary of State for Foreign Affairs if he will convey the thanks of His Majesty's Govern-

ment to the Government of the Swiss Republic for having, whilst maintaining the strictest neutrality, rendered great and humane service over a series of years to refugees and interned Service men of all nationalities within their territory.

Mr. Eden: I think the Swiss Government are already aware of the gratitude felt by His Majesty's Government for the many services which they have rendered us as Protecting Power. But I gladly avail myself of this opportunity to give public expression to the very warm gratitude of His Majesty's Government for the action of the Swiss Government in giving asylum and ministering to the needs of large numbers of refugees and escaped prisoners of war of many nationalities within their territory.

Oral Answers to Questions — ARGENTINA (PRIMITIVA COMPANY)

Major-General Sir Alfred Knox: asked the Secretary of State for Foreign Affairs if he can give any information of the result of his approach to the Argentine Government regarding the proposal to confiscate the assets of the Primitiva Company.

Mr. Eden: The legal expropriation of the company's installations in Buenos Aires was decreed on 13th April and failing direct agreement between the parties it now falls to the Argentine Supreme Court to determine the compensation payable to the company. In this respect the company's representatives have received satisfactory assurances from the Argentine authorities who have been left in no doubt of the importance which His Majesty's Government attach to their fulfilment.

Sir A. Knox: Will my right hon. Friend bear in mind that, apart from the interests of individual shareholders, these overseas investments, owing to the loss of other British investments overseas, will be of great national importance after the war?

Mr. Eden: I entirely endorse that.

Oral Answers to Questions — FRANCE AND UNITED NATIONS (RELATIONS)

Mr. Boothby: asked the Secretary of State for Foreign Affairs (1) whether it is proposed to recognise the


National Committee as the provisional Government of France;
(2) whether he can make any statement about the negotiations with General de Gaulle; and whether any agreement has been reached with regard to the administration of occupied territory in France;
(3) whether any issue of French currency has been made to the Allied troops now fighting in France; and, if so, by whom it is backed.

Mr. Martin: asked the Secretary of State for Foreign Affairs whether conversations on the relations of the French Committee of National Liberation with the British Government, especially on matters concerning civil administration in France before elections can be held there, have yet taken place; and whether he can, make a statement on the matter.

Mr. G. Strauss: asked the Secretary of State for Foreign Affairs whether he can make any statement about the large issue of French banknotes printed in the United States for the use of Allied soldiers in France; whether this was done in agreement with the French authorities; and whether any arrangement has been made as to the responsibility for redeeming these notes.

Mr. Martin: asked the Secretary of State for Foreign Affairs whether the printing of French franc notes in the U.S.A. for use of troops serving in France was done in agreement with His Majesty's Government; whether these notes or similar ones will be used by British troops; and whether he will make a statement on the matter.

Captain Plugge: asked the Prime Minister whether he can make any statement on the present relations of General de Gaulle with the United Nations.

Mr. Eden: I would ask my hon. Friends to be good enough to await the statement which the Prime Minister proposes to make at the end of Questions.

Mr. Cocks: Will the Government send a firm request to America to appoint a political representative over here to discuss with the right hon. Gentleman and General de Gaulle this question of civil administration?

Mr. Eden: I hope the hon. Member will await what the Prime Minister has to say.

Mr. A. Bevan: On a point of Order. As there are so many Questions on the Order Paper, which fall to be replied to by the Prime Minister, is it proposed that he will make a statement in a manner which will give the usual facilities to the House?

Mr. Speaker: The statement will be made at the end of Questions, and supplementary questions can then be asked in the usual manner.

Mr. Bevan: The practice of making very important statements of this sort, which we cannot adequately discuss, is surely being greatly abused.

Mr. Eden: I want to make it plain, Mr. Speaker, subject to your Ruling, that questions can be put as if my right hon. Friend's answer had been given now.

Later—

The Prime Minister (Mr. Churchill): There are seven Questions on the Order Paper on this subject, to which I can make only one answer. I do not consider that this matter can be dealt with satisfactorily by a number of separate answers at Question Time. On the other hand, I must advise the House most seriously that a Debate on this matter would have very great dangers. One tale is good till another is told. His Majesty's Government take great trouble over their conduct of business, and on the whole it may be said that it has been conducted with success. When you look at the advance in Italy and the extraordinary achievements of the cross-Channel landing in France, a fair-minded man would consider that the Administration had a right to the confidence of the House when they said they did not wish a particular subject discussed. This is not because we are not prepared to discuss it in all detail, and if need be in all severity; but the result of such a discussion might well be to emphasise any differences which exist with the French Committee of National Liberation, headed by General de Gaulle. I should be sorry to see these issues prematurely forced to a decision, and, therefore, I ask from the House a measure of leniency and forbearance in their treatment of this matter.
If, however, there is a desire on the part of a large number of Members to bring these matters to a head, then the rights of the House must clearly be met, and a suitable occasion for a Debate will be found. I should advise strongly against this now. In addition to our relations with the French Committee of National Liberation, headed by General de Gaulle, we have also to consider our very close relations with the United States and their relations with the body I have just mentioned. I think it would be better to allow the relationships prevailing between General de Gaulle and the United States to proceed further before we have a formidable Debate on these questions, which might well be of comfort to the enemy. I, therefore, appeal to the House not to disregard my counsel.

Mr. Boothby: I should like to ask my right hon. Friend two questions. The first is, whether his attention has been called to the statement of the President of the United States yesterday, that the issue of franc notes is backed by the British and United States Treasuries, and if that is the fact or not; because I think the House is entitled to know. The second question is, whether it is a fact that the French Provisional Government have appointed a regional commissioner for the Rouen district, without prior consultation with the Allies.

The Prime Minister: I said that I did not think it would be advisable to answer a number of questions. I remain of that opinion.

Sir Percy Harris: While recognising the right of the Government to our confidence in the special circumstances, might I ask the Prime Minister whether he will give an undertaking that this matter will not be indefinitely postponed? Will he, as early as possible, make a full statement, because of the natural sympathy of the people of this country for the French people, both in this country and in their own country, now that their land is partly free from the invader?

The Prime Minister: We are going into the very thing I said I would like to avoid, namely, a Debate. I have no reason to fear a Debate on the subject, except that I think it would be necessary to put a case which would cause widespread pain.

Mr. Shinweil: While I appreciate the desire of the Prime Minister not to have a Debate at this stage, could he reassure me on this point? Are the financial arrangements in France and the recognition of the French Committee of National Liberation, and cognate matters, now being discussed with General de Gaulle and the French Committee?

The Prime Minister: In this last week of great success, I should think as large a proportion of our time was given to the discussions about General de Gaulle and his affairs and his Committee as to any other subject. I can assure the House that it is not that these matters are not engaging the attention of His Majesty's Government. They are very much indeed. But I am reluctant to bring them to a head at present, and I hope that a better solution will be achieved than would be the case, if there had to be a quite definite threshing out of the matter in the House of Commons. With regard to the financial point, it is rather technical. The President made a statement last night, which is published, I believe, in this morning's papers, but I have not had a chance of reading that statement. I could not commit myself to anything about finance—a statement about which might well be made by the Chancellor of the Exchequer—until we know what it is that the President has said on the subject. It seems to me, however, quite clear that if notes are given out to the French population, in return for livestock and other services, the responsibility for meeting them, in the first instance at any rate, would lie with the Governments issuing them.

Mr. A. Bevan: Is not the House peculiarly entitled to an explanation, in answer to the first question put by my hon. Friend the Member for East Aberdeen (Mr. Boothby)? If the credit of this country is being committed to any currency whatsoever, this House is the first place to be consulted on such a matter. It is not consistent with the authority or the dignity of the House of Commons, that financial transactions of this sort should be entered into, without consulting the House of Commons. May I, further, ask whether the Prime Minister appreciates the very grave anxiety which exists in very many parts of this country, that American and British lives may be endangered in France as a consequence of


the political handling of this question by the Government, and that, although we are all delighted with the military successes on the Continent, His Majesty's Government do not, in fact, receive the full confidence of all the peoples in their political handling of the war? [Interruption.] They do not, and, in point of fact—[HON. MEMBERS: "Speech."] Hon. Members must allow a suggestion to be made in other quarters on these occasions. On a point of Order. I asked you, Sir, during Question Time whether full facilities were to be given to the House to discuss such a statement as this, and I, therefore, insist that I should be allowed to complete my question. Does the Prime Minister realise that certain observations by him on the political conduct of the war have been deeply resented by millions of people, in this country and elsewhere?

The Prime Minister: I am afraid the hon. Gentleman's question was so long that I have forgotten what was the point of it. I am quite certain that there has been no breach of the financial regulations and rules and practices of the House. In regard to any issue of chits or notes, in foreign countries, that is all covered by the general conditions of the expenditure on the war, and all has to be accounted for to the House in the proper method and at the proper time. As for the general question of whether there is entire agreement throughout the country and in the House, on all the ways in which the different foreign policies, as affecting all the various countries, have been handled, I can assure the House that I have never aimed at so high an ideal, and, when I think of some of the persons who would have to be converted, I am very glad that I never set my aim so high.

Mr. Martin: May I ask the Prime Minister, in regard to the question addressed to him by the right hon. Member for South-West Bethnal Green (Sir P. Harris), whether we are in this position: that this matter is now barred for an indefinite period from the consideration of the House, because, after the reply which the right hon. Gentleman has given, it is going to be very difficult for hon. Members to raise questions on this point? Will the right hon. Gentleman reconsider this matter, in view of the fact that, not only the interest but the duty of hon. Members is involved in this matter, and it is not fair

that the right hon. Gentleman should make an appeal to them to maintain silence for an indefinite time, an a matter which involves such profound principles, whatever we may think of the conduct of the war by His Majesty's Government? Will the right hon. Gentleman not give some further encouragement to us to believe that this matter will be dealt with at an early date?

The Prime Minister: I never intended it to be indefinite postponement, but I do not think it would be a good thing to have a Debate in the House now. I am certain it would do more harm that good, and might lead to things being said which afterwards were found to have very serious repercussions, because, if attacks are made, answers will be given, whenever required. Therefore, I still adhere to my request to the House, and my advice to the House—it can only be advice; I am entirely in their hands—that they will not raise this matter at this time. But I assure the House it is my earnest desire to give them the fullest account of all these matters, when that can be done without prejudice to such hopes as remain, in respect of such matters in the future.

Mr. Boothby: May I ask the right hon. Gentleman whether he is aware that there is great anxiety in this House and in the country and the Press, not so much about what may be said, but about what actually is now being done; and will he give the House an assurance that, as soon as he can possibly manage it, we shall have a Debate, either in public or in Secret Session, at the will of the Government, in order that we can discuss this matter, because it ought to be discussed?

The Prime Minister: I do not at all agree that there is great and widespread anxiety. It certainly deserves careful and unremitting attention, but I think that, if there is great and widespread anxiety in this matter, it will be, and should be, properly directed to our gallant soldiers who are striking down the enemy in France and advancing continually, and to the great operations which are in progress, and which give hope as well as anxiety. It seems to me very lacking in proportion for hon. Members—Would the hon. Member like to say something more? If he does not wish to do so, perhaps he will allow me to finish what I have to say. I say, I think it shows a marked sense of disproportion and I am earnestly


hoping that we shall not be pressed at this time. If I had no hopes of a better solution than I could announce at the present time, I would not0 ask for the delay.

Mr. Edgar Granville: Will the right hon. Gentleman bear in mind that, in recent Debates, the House of Commons has expressed a very strong view on this question, which did reflect a fairly general opinion in this country; and will he also bear in mind that, while there may be complete silence in the House, the Press of the United States and of this country is openly debating this matter? Will the right hon. Gentleman also bear in mind that many of us are being pressed by our constituents—[Interruption]—many of us are being asked if the right hon. Gentleman cannot give an assurance that there is nothing to prevent General de Gaulle from landing in France if he so wishes?

Mr. Churchill: That last question is one which I hope may be found capable of solution.

Earl Winterton: May I ask the Prime Minister if he will have regard to the fact that some of us who are not pressing for a Debate, are yet disturbed by the most searching and painful anxiety about the position of General de Gaulle; and will he have regard to that situation, and not indulge in the slightest degree in any painful observations. We only want to be assured that, some time, these terrible complications which have arisen, and which may jeopardise the peace of Europe after the war, may be resolved?

Mr. Churchill: As to the question of peace in Europe after the war, we have a long way to go before we can be sure what is going to jeopardise peace. We have also some way to go before we can say what is going to be done to stop peace being jeopardised.

Sir William Davison: rose—

Mr. Speaker: I really think we cannot pursue the matter now.

Oral Answers to Questions — DODECANESE ISLANDS (POST-WAR STATUS)

Mr. Astor: asked the Secretary of State for Foreign Affairs whether the Dodecanese Islands are covered by the provisions of the Atlantic Charter.

Mr. Eden: The post-war status of the Dodecanese Islands cannot be decided at this stage.

Mr. Astor: Surely the Atlantic Charter does not exclude territories inhabited by members of- the gallant Greek nation?

Mr. Eden: No, Sir; I think my hon. Friend's conclusion would be about correct.

Mr. Ivor Thomas: Is the right hon. Gentleman aware that leading members of the present Italian Government have publicly expressed their wish that these territories should go to Greece?

Mr. Eden: So much the better.

Oral Answers to Questions — EGYPT (ESSENTIAL UNDERTAKINGS ORDER)

Mr. Keeling: asked the Secretary of State for Foreign Affairs under what section of the Emergency Powers Act, 1939, he made the Emergency Powers (Defence) Employment in Essential Undertakings in Egypt Order (S.R. & O. No. 9, of 1944), whereby British subjects in Egypt are subject to direction as to their employment.

Mr. Eden: My Order of 6th May, 1944, applied to certain undertakings in Egypt Regulation 58AC of the Defence (General) Regulations and was made under power given to me by that Regulation. Regulation 58AC was made by Order in Council on 27th November, 1941, under powers given to His Majesty in Council by sections 1 and 3 of the Emergency Powers (Defence) Act, 1939, as amended by the Emergency Powers (Defence) Act, 1940.

Oral Answers to Questions — ROYAL AIR FORCE

A.T.C. Cadets (Footwear)

Mr. Hugh Lawson: asked the Secretary of State for Air if he is aware that cadets of the A.T.C. are being asked to undergo a week's strenuous training at R.A.F. stations; that this training is likely to render the civilian footwear of the cadets unserviceable; and if he will consider the issue of Service footwear to the cadets who attend these periods of training.

The Secretary of State for Air (Sir Archibald Sinclair): I regret that, owing to shortage of materials, it will not be practicable to issue Service footwear to cadets undertaking voluntary training at R.A.F. stations this year.

Mr. Lawson: Is the Minister aware that his answer means that cadets will be prevented from undertaking this training?

Sir A. Sinclair: I only wish I could provide boots, but I am afraid the supply situation does not allow it.

Deceased Officers' Estates (Gratuity)

Viscount Suirdale: asked the Secretary of State for Air whether he proposes to amend the regulations under which the estates of officers on short service commissions engaged in flying duties in the R.A.F., whose terms of service have been extended from four to six years, receive no gratuity if the officers in question are killed before the six years are completed; and whether he will amend such regulations retrospectively to cover the estates of officers who have already been killed during their fifth and sixth year of service.

Sir A. Sinclair: No, Sir. Conditions of short service commission engagement include a gratuity of £300 payable at the termination of four years' service. If an officer at the end of his four years elects to enter into a further engagement for another two years the terms of such extension include the provision of a total gratuity payment of £500, to include the £300. The main purpose of this gratuity is to assist the officer in his re-settlement in civil life and the terms of the engagement expressly provide that it is not payable in whole or in part to the estate of an officer who dies or is killed while serving on the active list before completion of his engagement. In any such case the dependants come under the provision of the War Pensions Code for pensions and allowances of the Armed Forces where death is attributable to war service. The terms of these regulations are specific and known to officers before entering into their initial or extended short service engagements.

Viscount Suirdale: Is the right hon. Baronet aware that, in practice, these officers in war-time have no choice whether they extend their engagement or not; and that there is a great sense of grievance

among their relatives who feel that the Government, no doubt unintentionally, are making a profit out of their death?

Sir A. Sinclair: There is no ground what ever for any such suggestion, and, as I say, there are two questions here. One is the provision for dependants of deceased officers and they come under the Pensions Code. The other is the resettlement of an officer in civil life, and it is for that that the gratuity is given.

Mr. R. J. Taylor: Does the right hon. Baronet think it reasonable that if an airman agrees to an extended period of service, his relatives should lose his first gratuity?

Sir A. Sinclair: Yes, because it is for different objects. The dependants are provided for in one way. The object of the gratuity is to assist the resettlement of the officer in civil life.

Viscount Suirdale: In view of the difficulty of discussing this by question and answer, I beg to give notice that I will raise it on the Adjournment.

Parliamentary Franchise (Register)

Mr. Quintin Hogg: asked the Secretary of State for Air whether he is prepared to make inquiries, similar to that undertaken by the Secretary of State for War, with a view to ascertain the extent to which registration for the Parliamentary franchise has been effected in the R.A.F.

Sir A. Sinclair: Yes, Sir.

Mr. Hogg: Does the right hon. Baronet also agree, that the proportion, so far, in the Royal Air Force is small, even as compared with the meagre proportion in the Army?

Sir A. Sinclair: No, I have no evidence to that effect.

Sir Herbert Williams: Does the right hon. Baronet expect to get a more satisfactory answer to his inquiries than the Secretary of State for War has yet got?

Sir Richard Acland: About when will the right hon. Baronet be able to state what proportion has registered?

Sir A. Sinclair: I shall never be able to tell the House the exact proportion. I can only make a check here and there, to make certain that the thing is working.

Sir R. Acland: When may we ask for the result of that check—in a fortnight, a month or three months?

Sir A. Sinclair: The hon. Baronet can ask when he likes, and I will do my best to provide him with up-to-date information.

Mr. Sorensen: Can the Secretary of State, meanwhile, give any approximate figure? Is it not his business to find out how these men are anticipating their future civil responsibilities?

Sir A. Sinclair: No, Sir, it is much too soon, I am afraid, to suggest even an approximate figure.

Mr. Moelwyn Hughes: Cannot the right hon. Baronet give us, quickly, a return of those who have registered in the home establishment?

Sir A. Sinclair: No, Sir, not quickly. But I am doing my best to see that this registration is going forward, and we are all trying to make it the greatest possible success.

Sir H. Williams: Why not ask one or two competent town clerks? They could do the job in a week.

Mr. Driberg: Could the right hon. Gentleman say if these facilities have now been made available to men of the R.A.F. Regiment on gun-posts and other outlying sites?

Sir A. Sinclair: I should like to see that Question on the Paper.

Returned Oversea Personnel (Pay Books)

Lieut.-Commander Hutchison: asked the Secretary of State for Air whether he is aware that when personnel returning from overseas receive new pay-books, financial hardship is being experienced due to the delay in confirming credits in their old pay accounts; and whether he will take steps to expedite settlements in all such cases.

Sir A. Sinclair: Airmen returning home from overseas bring their paybooks with them. New paybooks are issued only when the old ones are full, but, even then, all relevant information is transferred from the old books to the new. Airmen on disembarkation in the United Kingdom, are entitled to draw an advance of 75 per cent. of the balance of pay due to them as shown in their pay-

books. If my hon. and gallant Friend is aware of any cases where difficulties have arisen, and will let me have particulars, I will gladly investigate them.

Operational Flights

Mr. Bellenger: asked the Secretary of State for Air whether operational flights over European occupied territory are considered to be of equivalent value to flights over Germany from the point of view of maximum number of flights to be undertaken before air-crew personnel are eligible for a period of grounding.

Sir A. Sinclair: Yes, Sir. That is the present position.

Pay and Allowances

Captain Strickland: asked the Secretary of State for Air what is the increased deduction made from a childless airman's daily rate of pay of over 7s. but not exceeding 8s., under the new scheme, and how much extra allowance is paid to the wife.

Sir A. Sinclair: The rate of qualifying allotment for airmen on rates of pay ranging from 7s. to 8s. a day is being increased from 1s. to 1s. 6d. a day. This will result in a corresponding increase of 3s. 6d. a week in the total amount of family allowance and qualifying allotment to be paid to the childless wives of such airmen.

Yugoslavia (Rescued Aircrews)

Captain Alan Graham: asked the Secretary of State for Air whether he is yet in a position to inform the House as to the names of the crews of British bombers shot down into the Danube in Yugoslavia on 8th April, and in Eastern Serbia on 7th May, who were rescued by men under the orders of General Mihailovitch.

Sir A. Sinclair: I regret that security considerations do not permit the publication of these names.

Mr. Hutchinson: asked the Secretary of State for Air whether the wife of an airman with dependent children of a former husband, but no children of the airman, will be entitled to receive the higher rate of family allowance for herself and the appropriate allowances for her children; and whether the position is the same if the former husband is contributing to the support of the children under a maintenance order.

Sir A. Sinclair: The answer to both parts of the Question is "Yes, Sir."

Oral Answers to Questions — AIRCRAFT PRODUCTION

Light Aircraft (Private Flying)

Sir William Everard: asked the Minister of Aircraft Production how many nearly new light aircraft of a kind suitable for employment for private flying and the light aeroplane clubs are now in the process of destruction by aircraft firms under orders from his Department; and whether instead they will be retained for post-war civil training.

The Minister of Aircraft Production (Sir Stafford Cripps): No nearly new light aircraft of a kind and quality suitable for employment for private flying and the light aeroplane clubs are in the process of destruction. Obsolete aircraft surplus to Service needs must from time to time be disposed of in order to economise storage space and to allow the limited manpower available to be concentrated on the preparation of aircraft in demand by the Services. I have no doubt that the needs of private flyers and light aeroplane clubs will be easily satisfied when the time comes, though I hope that most of these will be supplied from new production which will help to maintain our aircraft industry in the post-war period.

Repair Contract, Manchester

Sir W. Everard: asked the Minister of Aircraft Production why an aircraft contractor in the Manchester area employing upwards of 600 persons has been notified that his contract for repairs is terminated, whereas the Aviation Repairs Organisation at Oxford, who have issued this order in a letter dated 8th May, were trying to find capacity for repairing aircraft of a similar type.

Sir S. Cripps: The contract was terminated as a result of a decrease in the repair requirements of the particular aircraft concerned. As regards the second part of the Question, the Repairs Organisation at Oxford have not been seeking capacity for repairing aircraft of a similar type. The incident to which the hon. Member probably refers was concerned with the rearrangement of repair work on a quite different type of aircraft, whereby work formerly done by sub-contract for a main contractor was to be done by direct contract instead.

Output Statistics

Sir H. Williams: asked the Minister of Aircraft Production the output of aircraft for each of the calendar years 1936 to 1943.

Sir S. Cripps: The following are the figures of output of United Kingdom aircraft for the years in question. The figures are exclusive of spares and repaired aircraft.

1936
…
…
…
1,830


1937
…
…
…
2,218


1938
…
…
…
2,827


1939
…
…
…
7,940


1940
…
…
…
15,049


1941
…
…
…
20,094


1942
…
…
…
23,672


1943
…
…
…
26,263

It must be borne in mind that the figures in different years relate to varying types of aircraft and do not, therefore, give a complete picture of the increase in productive effort.

Oral Answers to Questions — MINISTRY OF INFORMATION

United States (Mutual Aid Publicity)

Captain Longhurst: asked the Minister of Information whether his attention has been drawn to the fact that of 90,000,000 adult citizens in the U.S.A., approximately 60,000,000 are unaware that Britain is providing the U.S.A. with military supplies under reverse Lend-Lease; and whether, in view of its post-war importance, he will take steps to ensure that at least this cardinal fact is brought to the attention of the American people.

The Minister of Information (Mr. Brendan Bracken): I understand that the arithmetic used by my hon. Friend is based on the results of one of the so-called public opinion polls which flourish in the United States. According to this poll out of approximately 90,000,000 adults in the United States, 27,000,000 do not know that the Japanese have captured the Philippines, 57,000,000 do not know that Canada is a member of the United Nations, and less than half of the people of the United States know that their country was not a member of the League of Nations. An even more incredible statement is made by the author of this poll. He maintains that over 70,000,000 Americans do not know what is meant by a subsidy—some farmers think a subsidy


is a sort of cover crop. It is not surprising, therefore, that these poll-takers did not succeed in finding any knowledge of reverse Lend-Lease in the United States. In fact, the British White Paper on Mutual Aid had the best and widest publicity ever received in America by an official document of this kind. Moreover, President Roosevelt made British reverse Lend-Lease the subject of his Twelfth Report in Congress, and Mr. Stettinius and many other leading Americans have paid notable tributes to it.

Captain Longhurst: May I take it that my right hon. Friend is therefore satisfied that the American people as a whole are aware of our reverse aid and that there is nothing in the statement of the Director of Public Opinion Research, Princeton University, that the vast majority of them are unaware that it even exists?

Mr. Bracken: I must confess that I am never satisfied at anything the Ministry of Information do, but I must also tell my hon. and gallant Friend that it is absolutely impossible to rub these facts into every mind in the United States. It is very difficult indeed for some people in this country to understand the magnitude of our war effort.

Mr. Sorensen: Could the right hon. Gentleman say whether, in his estimation, the British people are better informed in these matters than the Americans?

Mr. Vernon Bartlett: Even if the right hon. Gentleman is not entirely satisfied with the work done by his Department—rightly so in many cases—is he not fully satisfied with the work done by his people in the United States?

Sir H. Williams: Could my right hon. Friend tell me the amount of reverse Lend-Lease?

Mr. Bracken: That question should be put to the Chancellor of the Exchequer.

Mr. McGovern: Is it not the case that a considerable number of people in this country think that President Wilson is also President of Great Britain?

Armed Forces, Northern Ireland (Parcels)

Mr. Walter Edwards: asked the Minister of Information if he is aware of the grave dissatisfaction which has been caused through the ban on the dispatch

of parcels to the Forces stationed in Northern Ireland; and will he now reconsider the position.

Mr. Bracken: I do not think that the public fully understands that parcels may still be sent to the Forces stationed in Northern Ireland through permit holders. I can assure my hon. Friend that when security conditions permit the ban will be immediately withdrawn.

Mr. Edwards: Is my right hon. Friend aware that when applications are made to send parcels through the Permit Office, the Permit Office reply stating that only in exceptional cases can they be granted?

Mr. Bracken: I wish my hon. Friend would give me the cases he has in mind because the public is subjected quite enough to badgering, and if the officials do not carry out instructions given to them I shall see that they do their duty.

British War Effort (Pamphlets)

Captain Longhurst: asked the Minister of Information on what scale and in what countries the pamphlet, "What Britain has done," has been distributed; and whether this publication has been translated into Russian.

Mr. Bracken: Copies of this reference booklet have been sent to the Ministry's 46 missions overseas. Our representatives use the material contained in it in whatever way they think most suitable. It has also been widely distributed in the Dominions. With regard to the last part of the Question, "What Britain has done" has not been printed in the Russian language, but many of the points contained in it have already appeared in the official British Government newspapers circulated in the U.S.S.R.

Captain Longhurst: asked the Minister of Information whether he will make available in this country the series of pamphlets giving 50 facts about various aspects of Britain's war effort, which are at present available only in the U.S.A.

Mr. Bracken: Much of the material contained in these pamphlets has already been widely circulated in this country in the pamphlet entitled "What Britain has done." The serious shortage of paper prevents our distributing to the public at home the numerous reference booklets


which have been prepared for circulation overseas.

Broadcasts to Germany

Mr. John Dugdale: asked the Minister of Information how many British trade unionists broadcast to Germany each week and for how long a period.

Mr. Bracken: The B.B.C. devotes an aggregate of 1¾ hours a week to broadcasts specially directed to German workers. In these programmes a British trade unionist, who is a regular commentator, speaks twice a week. In addition there have in the past four months been ten broadcasts by British trade unionists. Important speeches by British trade unionists and items of trade union interest are also reported in news bulletins broadcast to Germany.

Mr. J. Dugdalé: asked the Minister of Information how many free Germans, who are known to be anti-Nazi, broadcast to Germany each week and for how long.

Mr. Bracken: There are a number of Free German organisations in this country, and they are not all in accord. Their members do not broadcast to Germany on the B.B.C. But broadcasts in German to listeners in Germany and Austria are given for an aggregate of over 46 hours each week and some of these are made by anti-Nazi Germans.

Mr. Dugdale: Would not the right hon. Gentleman agree that, while they are not in accord on everything, which is something also found in this House, they are in accord in one thing, namely, that they are against Hitler and the Nazis; and would it not be advisable to make as much use of them as possible, thus proving to the Germans that there are anti-Nazis?

Mr. Bracken: So far as I can discover from the conduct of these gentlemen, they seem to hate each other more than they hate Hitler.

Sir Alfred Beit: Is there not some reason to believe that these broadcasts are more effective when made by Britishers who speak German well?

Members of Parliament (Speeches and Votes)

Mr. Hugh Lawson: asked the Minister of Information if, in view of the interest taken by the public in the past records of

their elected representatives, he will produce a concise but comprehensive record showing the views of all Members of Parliament on all important issue as expressed in their Parliamentary speeches and votes and covering a period of the last dozen years.

Mr. Bracken: No, Sir. If I were to adopt the hon. and gallant Gentleman's suggestion I should have to produce a book about ten times as large as the "Encyclopedia Britannica."

Mr. Lawson: Is not the Minister aware that it would be a very simple thing to produce a book about twice the size of the one he recently criticised, "Your M.P.," and as comprehensive?

Mr. Bracken: I think that if I were to indulge in this type of publication and I had to make extracts, I might make extracts which would very much embarrass other political parties.

Mr. Shinwell: Could not my right hon. Friend confine it to the records of members of the present Government, including his own?

Mr. Bracken: I should be delighted.

Oral Answers to Questions — HOUSING

Prefabricated Houses

Sir Irving Albery: asked the Parliamentary Secretary to the Ministry of Works if the finish and fittings of the Portal bungalow inspected by many Members of this House are identical with those to be provided in the mass-produced houses; and, if not, in what respect do they differ.

The Parliamentary Secretary to the Ministry of Works (Mr. Hicks): The final decision by the Government on this factory made house has not yet been taken. The finish and fittings as finally approved in the model will be provided in the mass-produced houses.

Mr. A. Bevan: Before a decision is taken, will the House be given an opportunity of hearing what it is likely to be, and before money is spent on these houses will the hon. Gentleman seek the approval of the House of Commons to the design?

Sir H. Williams: Why has this bungalow deteriorated from the "Churchill" status to the "Portal" status?

Mr. Bevan: May I have an answer to my question?

Mr. Hicks: I could not give any guarantee that the matter will be debated in the House and that the opinion of every Member will be sought and a vote taken as to whether we ought to produce these houses.

Mr. Bevan: Is it not desirable that the House should he consulted upon the design of these houses before large sums of money are spent and a very undesirable house results?

Mr. Hicks: The only answer I can give is that well over 5,000 people have passed through the house, a cross-section of the community. Any number of representatives from organisations have been through. Eighty per cent. have been satisfied and less than 20 per cent. have put in suggestions which have largely varied according to each individual.

Mr. Montague: Would not the making of the improvements resulting from the criticisms add to the cost of the house?

Mr. Hicks: I should say in the main, yes. If the results of the criticisms were introduced they would add to the cost, and instead of it being an emergency house it would become a permanent house, which is not the object.

Sir I. Albery: What is the official designation of this building?

Ex-Servicemen's Houses (Possession)

Major Nield: asked the Minister of Health if he will consider introducing an amendment of the Rent Restriction Act so as td ensure that a house owner who has had to part with possession of his house as a result of joining the Armed Forces shall be enabled to recover possession of his house on quitting the Service in which he has been employed.

The Parliamentary Secretary to the Ministry of Health (Miss Horsbrugh): I would refer my hon. and gallant Friend to the answer given on 10th February last to my hon. and gallant Friend the Member for East Renfrew (Major Lloyd).

Building Labour and Materials

Mr. Lipson: asked the Minister of Health if plant, material and labour will be as available for the medium-sized and

smaller local firms as for the large contractors to enable the former to obtain their fair share of the contracts for the work of advance preparation of housing sites.

Miss Horsbrugh: As my right hon. Friend has previously stated no suitable firm is debarred from tendering. Labour and materials will be made available for any approved contract and plant to any suitable firm.

Mr. Lipson: Does that mean that no preference will be given to selected large contractors who have been successful in obtaining contracts during the war at the expense of the small contractors?

Miss Horsbrugh: I think the answer I have given makes that quite clear.

Oral Answers to Questions — HISTORICAL MONUMENTS COMMISSION

Mr. Keeling: asked the Parliamentary Secretary to the Ministry of Works whether it is proposed to extend the period covered by the Historical Monuments Commission.

Mr. Hicks: I understand that this matter will come before the Commission at their meeting at the end of this month. Any recommendation made by the Commission will receive careful consideration by the Government.

Oral Answers to Questions — ROYAL NAVY

Youths (Operational Service)

Colonel Greenwell: asked the First Lord of the Admiralty if young men under 18 years of age are still sent to serve in fighting ships of the Royal Navy employed operationally either as ratings or as midshipmen.

The Civil Lord of the Admiralty (Captain Pilkington): Yes, Sir.

Colonel Greenwell: Does it mean that the conditions for naval service are equivalent to conditions of service in the Army for young men?

Captain Pilkington: No, Sir, the circumstances are not the same because the conditions are different.

Mr. Bellenger: We recognise the gallant and heroic efforts of these youths, but they do go into action, and is it wise to keep up a tradition of the Navy that is


not followed in the other two Services in total war?

Captain Pilkingon: The circumstances are different in the Navy and the two things are not comparable. In actual practice we ask parents' consent when boys up to the age of 17 are involved.

Colonel Greenwell: Is the hon. and gallant Gentleman aware that certain of these young men have given their lives for their country before their eighteenth birthday?

Captain Pilkington: Not a very large number of 'boys are involved in this question; I think it is probably 1,500 I know that some of them have given their lives for their country.

Admiralty Works (Periodicals, Distribution)

Mr. McNeil: asked the First Lord of the Admiralty if he will ensure that permission is given, in Admiralty works and in works carrying out Admiralty contracts, to distribute or sell papers and periodicals which are permitted to be distributed or sold in other public works.

Captain Pilkington: At premises engaged on essential war production, Departments are authorised, under Defence Regulation 12, to take special security precautions, which include the control of distribution and sale of literature. In some Admiralty establishments which have been declared protected places, the same object is achieved by Regulations which existed prior to the Emergency Powers (Defence) Act, 1939. I am satisfied that these restrictions are necessary in the public interest.

Mr. McNeil: Would not the hon. and gallant Gentleman agree that, since the Ministry of Information has its own Press bureau and the Home Secretary takes care of security considerations, there is no justification for what is, in effect, a third censorship mainly directed against trade union periodicals or periodicals of that nature?

Captain Pilkington: No, Sir. These Regulations were made in conjunction with all the other Services and with the security people, and I am satisfied that they are necessary.

Mr. McNeil: Will the hon. Gentleman explain why, since there is no reference in the document to protected areas, any considerations of security arise?

Captain Pilkington: The hon. Member will realise that it is largely a question of the distribution of these papers.

Mr. Gollacher: Can the Minister give the House one case of where the censorship has been applied, except to a trade unionist or Left Wing paper?

Captain Pilkington: Not without notice.

Oral Answers to Questions — UGANDA (COFFEE MARKETING)

Mr. Sorensen: asked the Secretary of State for the Colonies why the Baganda Growers Co-operative Union in Uganda is only allowed to sell coffee to the authorised pools; why they were prevented from grinding and exporting their coffee direct; how far coffee growers are being encouraged to process their own coffee; and what conditions in general have to be observed in the marketing and exporting of Uganda coffee.

The Secretary of State for the Colonies {Colonel Oliver Stanley): I am making inquiries of the Governor and will communicate with my hon. Friend.

Oral Answers to Questions — PALESTINE

Communist Paper, "Kolhaam"

Mr. Gallacher: asked the Secretary of State for the Colonies if he is aware that applications made by the Communist Party of Palestine for a licence to publish their paper, "Kolhaam" have been refused; and whether, in view of the fact that the policy of the Communist Party of Palestine is the mobilisation of the whole people of Palestine in the fight against Fascism and the securing of the unity and co-operation of the Jewish and Arab people, he will take steps to secure the grant of this licence.

Colonel Stanley: Another hon. Member wrote to me last week on the same subject, and I have already asked the High Commissioner for Palestine for information about it by telegram.

British Police Officers (Widows' Pensions)

Sir Stanley Reed: asked the Secretary of State for the Colonies whether there is any scheme for the provision of pensions to widows of British officers serving with the Palestine police; and, if not, whether it is intended to establish one.

Colonel Stanley: Yes, Sir. Particulars will be found in paragraph 2 of the answer which I gave to a question by my hon. Friend the Member for Abingdon (Sir R. Glyn) on 11th May.

Citrus Industry

Mr. Riley: asked the Secretary of State for the Colonies whether, in view of the fact that last season was a disastrous one for the Palestine citrus industry, he can now state what plans have been decided in order to help the citrus growers to meet the costs of cultivation in the forthcoming season.

Colonel Stanley: A proposal has recently been received from the High Commissioner to continue during the forthcoming season the system of guaranteed cultivation advances to the citrus industry which applied during the 1943/44 season and to which I referred in my answer to the hon. Member on 15th March. This proposal is now receiving urgent consideration, and I hope that a final decision will be reached at a very early date.

Mr. Riley: Can the right hon. and gallant Gentleman state what is the amount proposed?

Colonel Stanley: I cannot do so offhand. Perhaps the hon. Member will put that Question down, and I will give him an answer.

Oral Answers to Questions — JAMAICA (RATES)

Mr. Gallacher: asked the Secretary of State for the Colonies whether he has approved tile action taken by the Governor of Jamaica in rejecting the unanimous proposals of the Kingston and St. Andrews Corporation for an increase of rates within the corporate area on premises whose value in the tax roll exceeds £1,000; as the alternative proposal for an increase in rates on all premises valued over £20 bears heavily upon small shopkeepers and artisans, and has increased rentals in working class tenements and residential areas; and as the overriding of the decisions of a popularly elected body tends to prejudice the future success of the Jamaican Constitution.

Colonel Stanley: I am making inquiry of the Governor about this matter and I will communicate with the hon. Member when his reply is received.

Mr. Gallacher: Will the Colonial Secretary see to it that the big interests are not allowed to put the burden on the small people and to get away without it themselves?

Colonel Stanley: I am not going to anticipate the Governor's proposals.

Oral Answers to Questions — COLONIAL OFFICE ADVISORY COMMITTEES

Mr. Riley: asked the Secretary of State for the Colonies whether he will have issued a list setting forth the number of Colonial Office Advisory Committees at present in existence: their personnel, their terms of reference, how often they meet and whether their Reports and recommendations will be made available to Members of Parliament.

Colonel Stanley: I will certainly issue a list on the general lines which my hon. Friend has in mind. In addition to the regular meetings of the full committees a great deal of work is done by sub-committees. These committees are advisory to the Secretary of State and stand in a confidential relationship with him. While many of their reports and recommendations have been published or otherwise made available to the House, it would not be possible to give an undertaking that this procedure should automatically be followed in every case.

Dr. Morgan: Can the right hon. and gallant Gentleman give the House some indication of the passport or password to these sacred tabernacles?

Colonel Stanley: When the hon. Member sees the list of these I think he will realise their efficiency and knowledge of the particular subject.

Mr. Riley: asked the Secretary of State for the Colonies why the Colonial Office Social Welfare Advisory Committee was established; how often the committee has met; what are its terms of reference; and whether it has yet made any recommendations.

Colonel Stanley: The Colonial Social Welfare Advisory Committee replaces, on a wider basis and covering a larger field of welfare questions, the former Colonial Penal Advisory Committee, whose members submitted their resignations in order to facilitate the formation of the new Committee. The terms of reference of the


Committee are, in general, to advise me on such questions as I may refer to them with regard to problems of social welfare. I am sending a copy of the full terms of reference to the hon. Member for his information.

Mr. Riley: Does the work of this committee overlap with the social welfare work of the Stockdale Commission?

Colonel Stanley: It is entirely different. The Stockdale Commission are the field workers on the spot. This is a central advisory committee on general problems.

Dr. Morgan: Could not the right hon. and gallant Gentleman publish the terms of reference in HANSARD?

Colonel Stanley: If the hon. Member puts down a Question on the matter I probably can.

Mr. Sorensen: Do the terms of reference cover the question of judicial offences?

Colonel Stanley: Yes, Sir.

Mr. Sorensen: Are the regulations made to cover penal offences?

Colonel Stanley: They still cover the original terms of penal reform.

Oral Answers to Questions — MAURITIUS (JEWISH REFUGEES)

Mr. Graham White: asked the Secretary of State for the Colonies how many men, women and children, respectively, were interned in Mauritius in 1940–41 because of attempting illegal entry into Palestine; how many have since died; how many have volunteered for service in the Pioneer Corps or in any other armed or, if women, auxiliary service of our own or Allied Forces; how many were accepted and released for such service and how many accepted but not so far released; how many have been released for civilian service or for reasons other than employment; and how many men, women and children remain interned.

Colonel Stanley: As the reply contains a number of figures, I will, with the hon. Member's permission, circulate a statement in the OFFICIAL REPORT.

Earl Winterton: Is it not the case that these people are not interned, but are in a refugee camp, which is quite a different thing?

Colonel Stanley: Yes, Sir. They cannot leave it, though.

Following is the statement:

The Jewish refugees transferred to Mauritius in December, 1940, comprised 848 men, 635 women and 96 children. At the 30th September, 1943, the numbers were 729, 611 and 82 respectively. Up to the end of March last there were 93 deaths among the refugees. Two hundred and twenty-four men have volunteered for service with the Allied Forces; 149 have been accepted and of these 93 have left the Island and the remainder are awaiting passages. Sixty-four women have offered their services unconditionally to His Majesty's Government, and the question whether their services can be utilised in a women's force is at present under consideration having regard to their age, qualifications, etc. One refugee has been released for civil employment elsewhere and five have been released and left the Island for other reasons.

Oral Answers to Questions — FACTORIES (REMOVABLE BLACK-OUT)

Major Procter: asked the Minister of Production what steps he is taking to remove permanent black-out conditions in factories and what results are being achieved; whether the permanent blackout will be removed from all factories in Lancashire before the war is over; and whether all the factories in a town of which he has been informed, engaged in essential work, will be able in the near future to work in daylight conditions.

The Minister of Production (Mr. Lyttelton): In collaboration with my colleagues in the Departments concerned, I am taking steps to facilitate the substitution of removable for permanent black-out in factories throughout the country so far as labour and materials are available. I am informed that in Lancashire removable black-out is now installed in about 95 per cent. of the larger factories engaged in essential production and is being installed in another 2 per cent. As regards the town referred to by my hon. and gallant Friend, my information is that removable blackout has been installed in 99 per cent. of such factories. My hon. and gallant Friend will, of course, understand that where removable black-out has been installed in a factory, this does not mean


that the whole of the glass is so fitted. It is sometimes difficult, for technical reasons, to make use of removable blackout on a large scale in a particular factory. So long therefore as there is a risk of air raids, it will in those cases be impracticable to resume full daylight working.

Major Procter: Do I understand from the right hon. Gentleman's answer that out of 7,000 factories in Lancashire 6,500 are working under conditions of natural light?

Mr. Lyttelton: I have not done the arithmetic but I repeat that 95 per cent. of the larger factories have removable black-out.

Sir H. Williams: How many bombs have not been dropped in Lancashire?

Mr. Thorne: Will the right hon. Gentleman do away with the black-out altogether between now and Christmas?

Oral Answers to Questions — FOOD SUPPLIES

Oranges (Price)

Sir H. Williams: asked the Minister of Food if he will state the purpose of the Emergency Powers (Defence) Food (Citrus Food) Order (S.R. & O., No. 610, of 1944), having regard to the fact that no oranges at 1½d. per lb. were available on 4th June, 1944.

The Parliamentary Secretary to the Ministry of Food (Mr. Mabane): The purpose of the Order to which my hon. Friend refers is, as explained in the Explanatory Note, to substitute a new range of maximum prices for oranges, including the maximum retail price of 7½d. per lb. in the place of the previous maximum price of 8½d. per 1b.

Strawberries

Mr. Douglas: asked the Minister of Food whether he is aware of the small volume of strawberries reaching the consumer through retailers; to what extent it is estimated that this is due to preemption by expensive restaurants and black market purchases; and what steps he is taking in the matter.

Mr. Mabane: Yes, Sir. Few strawberries are available because the main crop is not yet ready, and, in any case,

as the supply will be smaller than usual this year as a result of the frosts, retailers cannot expect large supplies. I have no evidence of illegal purchases of the kind suggested by the hon. Member.

Mr. Douglas: Is the Minister aware that in the Borough market yesterday morning all the strawberries were labelled "Sold"?

Mr. Mabane: No, Sir.

Mr. Evelyn Walkden: Why was it found necessary to give freedom to the Kent growers to become the agents of the profiteers of the West End restaurants, so that they themselves could pre-empt the strawberries instead of the Ministry of Food?

Mr. Mabane: I am not quite sure to what my hon. Friend refers, but he is, no doubt, aware that the smaller growers in Kent and other parts of the country have a retailing licence and therefore can sell as retailers to whom they please.

Mr. Walkden: Does it not mean that no Kent strawberries will come into the market?

Mr. Mabane: Not "no strawberries."

Allocation

Sir Stanley Reed: asked the Minister of Food if he will give an undertaking that when additional food supplies become available preference will be given to those areas where there are no works canteens, British Restaurants, or refreshment rooms where meals are served.

Mr. Mabane: No, Sir, this would not be possible, or, in the view of my right hon. and gallant Friend, desirable.

Sir S. Reed: Does the right hon. Gentleman recognise that despite the excellent work of his Ministry this matter presses very hard on the people concerned?

Mr. Mabane: Yes, Sir.

Oral Answers to Questions — GIBRALTAR (INCOME TAX)

Mr. Hugh Lawson: asked the Secretary of State for the Colonies in whom it is proposed to vest the power to raise revenue by taxation of incomes in the Colony of Gibraltar; and if it is proposed that the raising and expenditure of revenue is to be placed under the effective


control of a legislative assembly elected democratically by the inhabitants of the Colony.

Colonel Stanley: The Government of Gibraltar will take the necessary powers by legislation. As regards the last part of the Question, I am considering in consultation with the Governor, proposals for giving the local people in Gibraltar a wider voice in the internal administration of the Colony.

Oral Answers to Questions — COLONIAL SERVICE (NON-EUROPEAN WOMEN)

Mr. Sorensen: asked the Secretary of State for the Colonies if he will state the total number of non-European women holding major or minor public positions and administrative posts in the West African and West Indian Colonies, respectively.

Colonel Stanley: This information is not available in the Colonial Office. But if the hon. Member will discuss the question with me I will be glad to consider what information can be obtained by inquiry from the Governors of the Colonies concerned.

Oral Answers to Questions — WEST AFRICAN COLONIES (CORPORAL PUNISHMENT)

Mr. Sorensen: asked the Secretary of State for the Colonies how many convicted persons received corporal punishment as penalties for offences during the last year, for which the records are available, in each of the West African Colonies; and the total number of such penalties during the past 10 years.

Colonel Stanley: Owing to war-time restrictions on statistical returns, the most recent figures available are those for 1938. I am asking the Governors for more up-to-date information and will send it to the hon. Member when I receive it.

Mr. Sorensen: What was the number in the last available year?

Colonel Stanley: If the hon. Gentleman puts down a Question, I will give the figure to him, but I must point out before I do so that, since 1938, further instructions on this subject have been issued to Governors, which have largely altered the administration in this respect.

Mr. Sorensen: Are we to deduce from that, that the figures for the last year are so bad that they cannot be given in this House?

Colonel Stanley: No, Sir, certainly not. The hon. Member may deduce from it that since the figures were published there has been a change in policy in regard to administration in this matter.

Sir Alfred Beit: Is it not a fact that the number of offences for which corporal punishment can be imposed in West Africa has been very much reduced?

Oral Answers to Questions — PARLIAMENTARY FRANCHISE (SEAMEN)

Sir Richard Acland: asked the Parliamentary Secretary to the Ministry of War Transport what steps his Ministry has taken to comply with Section To of the Parliament (Election and Meetings) Act, 1943.

The Parliamentary Secretary to the Ministry of War Transport (Mr. Noel-Baker): All the necessary arrangements have been made for seamen to make their declarations under Section 10 of the Act of 1943, and to appoint their proxies. The declaration and proxy cards have been printed, and a pamphlet explaining the seaman's rights has been prepared. The cards and pamphlets required in ports abroad will be despatched at the earliest opportunity; distribution in the United Kingdom will be begun as soon as practicable.

Sir R. Acland: Could the hon. Gentleman say just what the necessary arrangements are, the point being that one is sometimes asked by merchant seamen what they have to do to get registered, and if one gave them the answer the hon. Gentleman has just given, they still would not know?

Mr. Noel-Baker: We have prepared a pamphlet which will instruct the man what he has to do and it will be available on board ship at home and in foreign ports. In foreign ports the captain of the ship will contact with the British Consul. At home it will be done through the Mercantile Marine Office.

Mr. Maxton: Will the hon. Gentleman say why his Ministry are so far behind compared with the Army?

Mr. Noel-Baker: We have not the same facilities for dealing with personnel that the Services have, and in the last six months the staff of our Mercantile Marine Office have been very busy preparing for the present operations.

Mr. Maxton: Is there no one in the hon. Gentleman's Department who could have written this pamphlet at the time it was called for?

Mr. Noel-Baker: We have done our best. We have been working under very heavy pressure. I think it will be in time.

Sir Irving Albery: Have British Consuls been instructed to deliver the pamphlets on board British ships in foreign ports?

Mr. Noel-Baker: Yes, Sir.

Oral Answers to Questions — WAR CRIMES, GERMANY (INTERNATIONAL JURISDICTION)

Sir William Davison: asked the Attorney-General whether he is aware that under the existing law there is no power to try a German for a crime committed by a German against a British subject in Germany; and whether he will introduce legislation to deal with this urgent matter.

The Solicitor-General (Major Sir David Maxwell Fyfe): There are a few exceptional cases in which crimes committed abroad if committed by British subjects can be tried in a British Court. To claim criminal jurisdiction over foreigners for acts done abroad would be contrary to the principles acted upon and maintained by this country whenever this question of extra territorial jurisdiction has arisen. This deals with the normal criminal jurisdiction exercised by the ordinary courts. The right recognised by international law to try and to punish enemies guilty of offences against the laws and usages of war wherever committed is not affected by the earlier part of this answer.

Sir W. Davison: Do I understand that, apart from crimes under so-called municipal law, crimes committed in Germany by Germans against British subjects are punishable under international law?

The Solicitor-General: Crimes against the laws and usages of war are punishable by international law.

Oral Answers to Questions — ROAD TRANSPORT OF GOODS ORDER

Mr. Hutchinson: asked the Parliamentary Secretary to the Ministry of War Transport if he will state the purpose of the Emergency Powers (Defence) Road Transport of Goods Order (S.R. & O., No. 580, of 1944), and why no explanatory memorandum was attached thereto.

Mr. Noel-Baker: Order No. 58o makes it unnecessary to issue permits for the movement of meat and livestock by the Road Haulage Organisation which is directed by my Department. Without the Order, permits would be required, because such movements are not covered by normal consignment notes. It only affects the operating arrangements of the organisation; when it is read with Order No. 497, its effect is evident; for these reasons it was not thought necessary to issue an explanatory memorandum.

Mr. Hutchinson: Is not an Order of this nature, which refers to a previous Order, and is not capable of being understood without reference to that Order, precisely the kind requiring an explanatory memorandum?

Mr. Noel-Baker: Yes, Sir. I admit frankly that it would have been better to have issued an explanatory memorandum, and I regret it was not done.

Oral Answers to Questions — BOMBED COMMERCIAL PREMISES (RECONSTRUCTION)

Mr. Bossom: asked the Minister of Town and Country Planning whether owners of large commercial properties or others whose industrial premises have been seriously bomb-damaged can instruct their architects to go ahead now with the preparation of final working drawings for their post-war premises on the understanding that the former frontage lines, etc., will not be altered; and, if not, when will he be in a position to make a statement.

The Parliamentary Secretary to the Ministry of Town and Country Planning (Mr. Henry Strauss): No, Sir. It would clearly be impossible to give such an assurance.

Mr. Bossom: Could my hon. Friend explain when there will be some possibility of information on this subject, be-


cause it will take possibly 18 months to two years for the drawings to be made and the permits for building ready for contract, and any further delay due to the land situation is very serious?

Mr. Strauss: Owners in such cases should consult the local planning authorities, but my hon. Friend will appreciate that it may not always be possible for the planning authority to give a final answer at the present time.

Mr. Bossom: Would my hon. Friend get his Department to make their decisions as quickly as possible, so that planning authorities can do their part?

Sir R. Acland: Is it not impossible to do this until it is decided whether or not landlords are or are not going to be able to exploit the public, as they did before the war?

Oral Answers to Questions — BRITISH ARMY

Middle East (Hotels and Restaurants, Restrictions)

Mr. Lipson: asked the Secretary of State for War why, in the Middle East base areas, certain hotels and restaurants are in bounds for officers only and not for other ranks; and is he aware that this discrimination is resented.

The Financial Secretary to the War Office (Mr. Arthur Henderson): A report on this is being forwarded by the Middle East. When it is received I will communicate with my hon. Friend.

Mr. A. Bevan: Does my hon. and learned Friend realise that many Members of the House have received complaints from serving soldiers on this matter, and will he therefore make known to the House itself any reply he receives?

Mr. Henderson: Certainly, Sir.

Mr. John Dugdale: Is my hon. and learned Friend aware that at the Queen's Hotel in Aldershot there are two bars, one marked "Officers and cadets," and the other, curiously enough, "Gentlemen only"?

Operations, France (Postal Arrangements)

Major Nield: asked the Secretary of State for War what arrangements have been made for a mail service to the Armed Forces serving in France; and if he is

satisfied that all steps are being taken to ensure as efficient a service as circumstances permit.

Mr. A. Henderson: I would refer my hon. and gallant Friend to the reply given to my hon. Friend the Member for Thirsk and Malton (Mr. Turton) yesterday. As regards the second part of the Question, I am satisfied that the Army postal authorities are doing their best to ensure as efficient a service as circumstances permit.

Mr. Turton: As the Secretary of State said yesterday that the present arrangements are only temporary, and as it is delaying the mails to address them to troops at Army Post Offices in England, will he accelerate the change-over from these temporary arrangements to a more stable and speedy system?

Mr. Henderson: We hope to make the changes as soon as possible, but I think I ought to tell the House that in the first three days 23 tons of mail were taken over to the other side.

Oral Answers to Questions — MINISTER WITHOUT PORTFOLIO (SCIENTIFIC STAFF)

Mr. Salt: asked the Minister without Portfolio what scientific advice and scientific staff and advisers are available to him particularly with regard to health, nutrition, agriculture and other relevant matters; and whether he is satisfied that adequate arrangements have been made in this respect.

The Minister without Portfolio (Sir Jowitt): I would refer my hon. Friend to the answer which I gave him on 22nd February last, to which I have nothing to add.

Oral Answers to Questions — HAIRDRESSERS (CLOTHING COUPONS)

Mr. John Beattie: asked the President of the Board of Trade whether his Department have decided to supply hairdressers with the Industrial Ten coupons, like workers in less essential trades and public services, when the supply position improves; and whether, on account of the excessive stocks of hairdressers' shop coats and materials for making these coats held by Northern Ireland suppliers, he will now grant the concession of the Industrial Ten coupons to Northern Ireland hairdressers.

The Parliamentary Secretary to the Board of Trade (Captain Waterhouse): Until the general supply situation shows signs of substantial improvement, my right hon. Friend cannot consider any extension of the present industrial supplements. Stocks of shop-coats and overall-cloth over the country as a whole are not more than adequate to meet total requirements.

Oral Answers to Questions — UNITED STATES (MUTUAL AID)

Sir Patrick Hannon: asked the Chancellor of the Exchequer if he is now in a position to make a statement on the volume at the latest convenient date of reverse Lend-lease operations in relation to the U.S.A.

The Chancellor of the Exchequer (Sir John Anderson): Figures up to the 31st December, 1943, are contained in the reply given to my hon. and gallant Friend the Member for Cardiff South, on the 9th March, 1944. Detailed figures up to a later date are not yet available, but according to preliminary estimates, apart from the programme of capital installations, we were transferring goods and services (including shipping services) at the rate of about £260 million a year during the first quarter of 1944 as compared with £120 million a year during the first quarter of 1943. Our total free aid to the United States, both in this country and abroad, up to 31st March, 1944, is estimated to amount to not less than £470 million.

Sir P. Hannon: Is my right hon. Friend taking any steps to instruct our Information Bureau in the United States to make these facts clear to the people of the United States?

Sir J. Anderson: I am sure that is always kept in view.

Oral Answers to Questions — CROWN AND MUNICIPAL LAND

Mr. Graham White: asked the Financial Secretary to the Treasury the amount of land now held by the Crown and by municipal authorities, excluding land held for military purposes by the Service Departments.

The Financial Secretary to the Treasury (Mr. Assheton): No, Sir. The compilation of such a statement would call for an

amount of work which, in my view, would be disproportionately heavy in relation to the purpose to be served, and I hope that, in the circumstances of to-day, my hon. Friend will not press me to make such an inquiry.

Mr. Gallacher: Does the Financial Secretary not consider that the time has arrived when all the land in the country should be taken over? Then it would be an easy matter to make a statement.

Oral Answers to Questions — DARDANELLES (GERMAN SHIPS)

Mr. Ivor Thomas: (by Private Notice) asked the Secretary of State for Foreign Affairs whether he has any statement to make on the passage of German naval vessels through the Turkish Straits.

Mr. Eden: Of recent months the German authorities have started to move shipping from the Black Sea, where, after their defeats, they no longer require it, through the Straits into the Ægean Sea, where, in consequence of the efforts of the Royal Navy and the Royal Air Force, the German shipping position has greatly deteriorated. A few of these German ships are merchantmen. Other vessels, however, fall into a different category. These are of two types. The first are what are known as K.T. vessels, ships of some 800 tons, with a normal armament of two 3·7 inch guns and machine guns. The second type are known as E.M.S. craft, of some 40 or 50 tons, with a normal armament of one 3 pounder, machine guns and depth charges. The former are used mainly for the transport of troops, war stores and so forth, and the latter for all sorts of war-like purposes, including submarine chasing. To obtain passage for them through the Straits, the Germans dismantle their armament, which will be installed again when the ships reach their destination in the Ægean, and pass them through as commercial vessels.
Both classes of vessel must, however, be regarded as either men-of-war or auxiliary vessels of war, the passage of which by a belligerent through the Straits in time of war is prohibited under Article 19 of the Montreux Convention. The duty of the Turkish Government to stop these vessels is the more evident when I remind hon. Members that they have already once detected the Germans in a


similar abuse of the Convention. German landing craft disguised as commercial barges were passed for some time through the Straits by the German navy. Then the Germans made the blunder of giving publicity to the military use of the barges and that particular fraud was brought to an end by the Turkish Government.
Four K.T. vessels and eight E.M.S. craft in all were during the first days of June passed through the Straits into the Ægean. In spite of representations by His Majesty's Ambassador at Angora, not merely against their passage but against the inadequate and hurried inspection to which they were subjected by the Turkish authorities, the Turkish Government have persisted in their claim that they can find no evidence on examination that they are other than commercial vessels.
In view of this unsatisfactory attitude and seeing that there are further ships of these types which the Germans will wish to pass from the Black Sea into the Ægean, His Majesty's Ambassador on instructions has represented to the President of the Turkish Republic that His Majesty's Government are profoundly disturbed by the fact that the Turkish Government should have lent themselves to this palpable manoeuvre of the German Government who hoped thereby to increase German naval strength in the Ægean to the direct detriment of British interests. The President has now promised to have the whole matter re-examined by his Government.
I should add that a further K.T. vessel which arrived at the entrance to the Bosphorus on 5th June has been detained in the Straits by the Turkish authorities.

Mr. Thomas: Can the right hon. Gentleman say that the Soviet Union have joined in a similar protest at Ankara?

Mr. Eden: We are in close touch with our Allies on this subject, but I should like to have notice of the question whether this particular representation has been joined in by them.

Mr. Bellenger: Will the right hon. Gentleman obtain an undertaking that all these German vessels will be prohibited from going through the Straits until a decision has been given by the Turkish Government?

Mr. Eden: That is exactly the point of the representations we have made to the Turkish Government and the Turkish President.

Oral Answers to Questions — PERSONAL STATEMENT.

Mr. Quintin Hogg: On a point of Order. May I ask for your guidance in this matter, Mr. Speaker? In col. 1921 of yesterday's HANSARD I am credited with a remark which led to certain other remarks being made by the hon. Member for South Croydon (Sir H. Williams). As I was not in the Chamber at the time and was, in fact, not within two miles of the Chamber, I ask your leave to expunge my name from HANSARD.

Mr. Speaker: I have no doubt that the remarks of the hon. Member will have the necessary effect and that the Editor of HANSARD will realise that the name of the hon. Member was inserted in error.

MESSAGE FROM THE LORDS

PALACE OF WESTMINSTER (ACCOMMODATION)

That they concur with the Commons in their Resolution:
That it is expedient that a Joint Committee of Lords and Commons be appointed to inquire into the accommodation in the Palace of Westminster, and to report thereon with such recommendations as appear to them desirable.

PRIVILEGE

Report from the Committee of Privileges, brought up, and read; to lie upon the Table, and to be printed. [No. 85.]

Minutes of Proceedings to be printed. [No. 85.]

Orders of the Day — FINANCE BILL

Considered in Committee.

[Major MILNER in the Chair]

CLAUSES 1 to 13 ordered to stand part of the Bill.

CLAUSE 14.—(Power to require security for tax as condition of holding a certificate of registration.)

Motion made, and Question proposed, "That the Clause stand part of the Bill,"

Mr. Barnes: I am sorry to interrupt for a few moments the progress we were making, but I want to put a question to the Chancellor of the Exchequer for the purpose of eliciting information as to the intentions of the Treasury. The Clause says:
The Commissioners may, where it appears to them to be requisite for the security of the revenue so to do, impose, as a condition of issuing a certificate of registration to a registered person … a requirement that he shall give security up to an amount and in a manner approved by the Commissioners for the payment of the tax.
That refers to the Purchase Tax, but I think it applies also to the Entertainments Tax. My point is that the Treasury are imposing upon the wholesaler, who is the collector of the taxes now, the added responsibility of putting up security for the revenue which he is collecting for the State, and there is some anxiety, or at least enquiry, as to the extent and the form of the security which will be required. On the face of it, it seems a little unfair that a trader who has had imposed upon him the functions of a tax collector and has to add to his capital commitments for the purpose of carrying the tax burden, is now in addition required to find some security. It transfers a burden which would normally fall upon the Treasury to the individual trader. I am not raising this point in a carping spirit, because probably it is difficult to avoid some action on these lines, but I should like to know whether the experience of the Treasury indicates that there is any great number of firms or companies who have not proved to be substantial and that that warrants the action which is proposed.

The Chancellor of the Exchequer (Sir John Anderson): I think I can explain this matter quite briefly. Under the Purchase Tax provisions a registered person, by using his certificate of registration, can purchase goods tax free from other registered persons, but he is required to account for the tax on disposing of the goods to non-registered persons. Under the law as it stands there is no power to refuse registration to a trader. No question arises in the ordinary case, but under war conditions a type of trader has come into existence—no doubt they are a small minority—who has no substantial position in regard to the trade in which he is engaged, and there is a danger that such a person, having used his registration certificate to obtain goods from other registered traders without payment of tax, may dispose, of the goods and disappear before he has discharged his obligation to the Revenue for the tax. The power is one which will be exercised with discretion in regard to persons whose suitability might appear doubtful. Experience has shown the necessity for it. It is not a very novel procedure, because it is quite usual to require security from traders who are dealing with revenue goods, and I submit to the Committee that the provisions of the Clause are justified by experience, are necessary to safeguard the revenue, and are such as the Committee may without hesitation concede.

Question, "That the Clause stand part of the Bill," put, and agreed to.

Clauses 15 to 18 ordered to stand part of the Bill.

CLAUSE 19.—(Income Tax for 1944–45.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Woodburn: I would like to put to the Chancellor a point which has been put to me. So far as I understand it it is this: that school teachers who have retired on superannuation payment are being charged Income Tax on last year's income. Their superannuation will now be liable to deductions under the Pay-as-you-earn system, and the question is whether they are entitled to and are being given the five months' remission which was given to other employed people in respect of their earnings during the past year, or whether they are being charged on the full income

last year and also having to pay under Pay-as-you-earn.

Sir J. Anderson: I am anxious not to make any statement which might be in any degree inaccurate. I am sure that teachers, like other persons, who have ceased to be employed and have gone on superannuation are dealt with in accordance with the provisions of the Pay-as-you-earn scheme and will receive the full remission or disregard of the overhanging tax; but I should like the opportunity of looking into the specific case and informing my hon. Friend.

Question, "That the Clause stand part of the Bill," put, and agreed to.

Clauses 2, 21 and 22 ordered to stand part of the Bill.

CLAUSE 23.—(Sale of copyrights for lump sum.)

Mr. E. P. Smith: I beg to move, in page is, line 38, after "partially," to insert:
or grants any interest in the copyright by licence
This Amendment and the two following ones are interlocked. Indeed, the two later ones are consequential upon this one, and I shall be glad to have your guidance, Major Milner, on whether I can speak to all the three Amendments on this, the first one, and then formally move the other two.

The Chairman: I think that would be for the convenience of the Committee.

Mr. Smith: It is true to say, broadly speaking, that no profession has suffered so much from the abolition of the three years' average in respect of Income Tax as the profession of authorship. It is also true to say that the occasional large lump sums paid to an author only accrue from works of some importance, in one sphere of literature or another; and it is very rare for such works to be produced through the whole gamut of making, from conception to completion, within the compass of one year, or even of two; and, thus, it will be seen how hardly the author is hit in his one year of what I may call fruition. Taxation swallows up his makings, and he has to face the next two or three lean years of production with nothing to tide him over until the next year of fruition. This Bill, if the Committee passes it, will give relief in-this respect,


a relief which, I venture to say, is not only timely, but wise, humane and just.
It may be asked how authors come to make these large occasional sums. They are received either in respect of the outright sale of copyright or the partial sale of copyright, and I think the easiest example to adduce is the sale of the film rights of any particular work. Moreover, since it is highly undesirable that an author should part with his copyright whenever he can possibly preserve it, he does, sometimes—in fact whenever he can—grant a limited interest in his copyright by licence. This first Amendment is intended to cover this form of payment, too; and the second Amendment is devised to bring the rest of the Clause into legal line with the first Amendment. One other way by which authors receive large lump sum payments is in respect of advance royalties. These, of course, lack the capital character of the outright or partial sale of a copyright. They come more within the description of pure income; and I have heard the argument put forward: "Why should authors accept large sums by way of advance royalties? Why should they not be content to receive their royalties as they accrue, which would then spread themselves over a period of time, possibly over several years, and thus annul the disadvantage of the one year income system of taxation?" The answer is a technical one. The publisher, particularly the United States publisher, is a person who thinks in terms of big money. He can afford to. Unless you can make him pay a large sum of money by way of advance royalties, unless you can force him to realise that he has a big financial stake in the success of your work, he will not bother with it. He will not advertise it extensively; he will not print it in large quantities, and he will probably only use it as a makeweight in his catalogue. In other words, it will go into the "bargain basement." Thus, the author is forced to stand out for large advance royalties, which are often the only royalties he will get, because he knows he cannot achieve success unless he does; and the purpose of this third Amendment is to include such non-returnable lump sum payments along with the proceeds of copyright and to bring them all under one common ruling.
If my right hon. Friend will accept this Amendment, it will be a great help to the profession, particularly to the less highly-

paid members of it. Indeed, so just, so logical and so obvious is it that one wonders how the present system can have gone on these many years without any attempt being made to rectify it in this respect. There is the story of a bishop who ardently desired a certain preferment, but was passed over. He was approached by a sincere, though simple, member of his fold who asked him what was the most effective thing that an ordinary man could pray for. The bishop replied, rather tartly: "Light in high places." I have always thought it an excellent piece of advice, and I have at times even added it to my own supplications. I hope my prayer may be, at all events, partially answered to-day.

Sir J. Anderson: I propose, with your permission, Major Milner, to follow the course taken by my hon. Friend and deal with the three Amendments which stand in his name together. He has explained the purpose of these Amendments and it might well be that the Clause, as it stands, already covers the cases which he has in mind, but there would undoubtedly be a certain element of doubt. For example—I am taking the first case he cited—where, instead of assigning expressly a copyright, wholly or in part, the owner of the copyright grants a licence, there have been cases, I understand, where the courts have held that the transaction amounted to an assignment. But the matter is not free from doubt and, therefore, I have no hesitation in saying I am perfectly prepared to accept the Amendment dealing with that point. Similarly, in regard to the case where a payment of royalties is attended by the payment of a lump sum by way of advance, the matter might be held to be covered by the Clause as it stands. It is desirable, however, to remove any element of doubt, and the case in question is entirely within the purpose of the Clause as I originally announced it in my Budget speech. Therefore, I also accept, if it is the will of the Committee, the two subsequent Amendments standing in the name of my hon. Friend.

Amendment agreed to.

Further Amendments made: In page II, line 40, leave out "assignment is in consideration," and insert:
consideration for the assignment or grant consists wholly or partially.


In page 12, line 32, at the end, add:
and the expression 'lump sum payment,' includes an advance on account of royalties which is not returnable."—[Mr. E. P. Smith.]

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 24.—(Maintenance orders.)

The Solicitor-General (Major Sir David Maxwell Fyfe): I beg to move, in page 12, line 43, to leave out "ten shillings," and to insert "one pound."
The Clause has the effect of changing the procedure as to Income Tax with regard to small court payments. Instead of the maker of the payment being entitled to deduct tax before he pays the recipient, the recipient of the payment will be assessed upon it. The object of this Amendment is to deal with the two classes of payment under the Bastardy Act and under the Guardianship of Infants Act where the payment in respect of a child may be up to one pound. To get all the payments in order, and to cover these necessary payments in respect of children, we felt that the same course, which we are suggesting for the other payments, should be applied to these. Therefore, we suggest that one pound is the correct amount.

Mr. Woodburn: This is a matter which might affect a large number of people and, for the sake of clarity, may I ask whether this will mean that, in a large number of cases, people who are recipients of such allowances, will not have to reclaim Income Tax which has been falsely or wrongly paid by the payer; that this will eliminate a double transaction, and that people whose income falls below the Income-Tax limit and are in receipt of these allowances, will no longer be troubled by Income Tax repayments?

The Solicitor-General: My hon. Friend has got the gist of the matter. The policy of Income-Tax collection is always to collect it as soon as you can, in the ordinary way, but where you have a court order, to produce the result which my hon. Friend has referred to, the payer would have to deduct tax, and in the days when people were more Income-Tax conscious the payer was always inclined to deduct tax from the payment and the recipient then had to make a claim, if his

or her income was under the allotted figure. In the change which we have brought about, the payer will not deduct Income Tax, and, if the recipient is under the Income-Tax figure, he or she will have to make a return in the necessary cases, but will not have to pay tax. On the other hand, if the payment brings the income over the figure, then he or she will have to pay tax. I hope I have made it clear.

Mr. Woodburn: There is one other point. Is there not the possibility of double Income Tax being charged on such allowances? For example, supposing a man gets £4 a week, he is charged Income Tax on that £4 under the Pay-as-you-earn scheme. He makes an allowance to his wife, who is separated from him, as the result of a court order. Is the wife liable, if she is an Income-Tax payer, to pay Income Tax on that portion of the allowance on which the husband has already paid tax? If they were living together as a married couple, Income Tax would be paid only on their joint incomes, whereas, if Income Tax were charged afterwards, it would mean taxing the allowance on both the man's and the wife's income, although it was really the husband's income.

The Solicitor-General: The payer has the right to deduct from his income the amount he has to pay. That prevents the double taxation which my hon. Friend has in mind.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 25.—(Simplification of procedure.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Benson: When the Financial Secretary moved the Second Reading of the Finance Bill, he remarked that I should probably approve of this particular Clause and so, in a mild and restrained way, I do. It goes one more step towards the abolition of the ancient machinery of Income-Tax assessment and collection, introduced at the time of Pitt's original Income Tax Bill, and it certainly does remove one of the major troubles and inconveniences of that old machinery. But there are others left. I am rather surprised


that the Chancellor of the Exchequer, who, himself, is an expert on Income-Tax matters, has not taken the bull by the horns, and has not modernised his machinery completely instead of having a piecemeal process. I am not referring to Income Tax law, but merely to the machinery. I have a new Clause later on the Paper with regard to the collection machinery, but there is still left the curious anomaly of the assessor who had an important function 150 years ago, but who to-day has no function whatever, except putting a formal signature to a few papers during the course of the year. Assessors are appointed by the local general Commissioners and the majority of Commissioners throughout the country have agreed to accept the Board of Inland Revenue suggestions of assessors, who are normally collectors under the Inland Revenue. But there is a small group of Commissioners who have steadily refused to accept this method of appointment of these sinecures and still claim the right to appoint in their own areas.
These assessors, in a number of cases, receive very large salaries for doing nothing whatever. There are 25 assessors in England who receive from £300 to £1,000 a year for a purely nominal job. The Commissioners in these areas still insist on retaining this power to appoint, and it is well to know who these Commissioners are. The Commissioners in London appoint eight of these entirely unnecessary assessors, in Leeds the Commissioners appoint three, in Leicester two, in Coventry one, Cardiff one, Stafford one. In Holborn they appoint six, and in London altogether there are nine. These men are drawing salaries varying from £300 to £1,000 a year, or an average of £500 a year for sinecures, and the general Commissioners refuse to give up their rights of appointment because they can appoint their friends and relations to these entirely unnecessary jobs. In regard to Scotland, there are five important ones, who receive on an average £900 a year. They need to know nothing, and they do know nothing about the Income Tax machinery and they play no part. The general Commissioners in Edinburgh still retain the right to appoint two of these assessors, in Glasgow they appoint two and in Dundee one. It is desirable that the country should know that there are certain towns and areas

where the Commissioners insist on maintaining the giving to their friends of large salaries for doing nothing. I want to know why the Chancellor of the Exchequer has not taken this opportunity of clearing away this piece of jobbery?

Sir J. Anderson: My hon. Friend is right when he says that there are certain features of the Income Tax machinery which are archaic. There are certain features which are a survival from an earlier state of things. Much has been done to modernise the machinery. I remember very well, when I was myself Chairman of the Board of Inland Revenue, taking a hand in the matter. I remember also that I had the support of the Chancellor of the Exchequer of the day, but, when it came to making proposals in draft legislation, certain difficulties were encountered, and, in the end, the changes that were made embodied some element of compromise, as very often happens in our public affairs. The re forms that have been made serve to bring into greater prominence the anomalous nature of certain of the survivals which still exist.
My hon. Friend asked me why I had not taken this matter up since I have had an opportunity of doing so. The answer must be that I have had a great many things to do, and one must put one's tasks in wartime in some order of priority. This is not quite so high in my list that I find it possible as yet to give attention to the matter, but I can promise that, as and when opportunity offers, I will look into the whole matter with my advisers and see what can and should be done.

Question, "That the Clause stand part of the Bill," put, and agreed to.

CLAUSE 26.—(Allowances for expenditure on scientific research not of a capital nature and on payments to research associations, universities, etc.)

The Chairman: May I suggest that the Amendment standing in the name of the hon. Member for Chesterfield (Mr. Benson)—in page 14, line 40, to leave out "after the appointed day "—and the Amendment in the name of the hon. Member for Colchester (Mr. Lewis)—to leave out "the appointed day," and insert "the first day of January, nineteen hundred and forty-five."—be discussed together.

Mr. Benson: I beg to move, in page 14, line 40, to leave out "after the appointed day."
I have put down this Amendment, in order that we may have some elucidation of what is, to me at any rate, obscure at the present time. The proposals of the Chancellor that certain concessions should be given in respect of expenditure on scientific research, and in a later Clause on capital expenditure on scientific research, are to be delayed until the appointed day. I have spent some time in trying to understand what his remarks in reply to the Second Reading Debate really mean. I am not clear. It seemed to me that his remarks applied to research for war purposes. He makes various references to expenditure already incurred, and later on points out that the expenditure already incurred obtains certain relief under existing Acts, but the relief given under existing Acts applies solely to expenditure for war purposes.

Sir J. Anderson: That is right.

Mr. Benson: Does the right hon. Gentleman suggest that it is only expenditure for war purposes before the appointed day that shall obtain relief? I do not think that that will altogether satisfy the Committee. We want expenditure for peace time purposes and on research on the turn-over from war to peace to receive the benefit of the concession. I know that little can be done at the present moment in peace time research, but it is very probable that before long we shall be able to turn over part of our industry to peace objects. Japan may hang on longer than Germany and in that case, as is already happening in America, a certain amount of industrial plant and energy might be released for civilian and postwar needs. It is there that research is vitally necessary and just as necessary as for war purposes, and, as far as I can gather from the remarks of the right hon. Gentleman, that type of research will not get any relief until after the appointed day. Is that what the Chancellor means? If so, I do not think that he has met the wishes of the Committee. If, on the other hand, I have misread what he said, and all forms of research will get relief, even if they occur before the appointed day, there is no need for the elimination of the appointed day. But I cannot understand, if it is to have no effect, why the appointed day is put in. If relief

after the appointed day is to be retrospective on all forms of expenditure on research, why put it in? There must certainly be some distinction between before and after the appointed day, and I shall be very glad if the Chancellor of the Exchequer will explain what it is.

Mr. Lewis: The concession proposed by the Chancellor of the Exchequer in respect of the expenditure on scientific research is a very valuable one and I am most anxious that industry should get the benefit of it as early as possible. The Committee will have noticed that I have tabled an Amendment suggesting that, instead of some indefinite date in the future as the appointed day, a definite date should be inserted in the Bill. The date I suggested was the beginning of next year, and I understand that, if the Amendment proposed by my hon. Friend the Member for Chesterfield (Mr. Benson) were carried, it would have the effect that the benefits would come into operation immediately, and to that I would not object. Therefore, I am prepared to support his Amendment. The point of pressing for an early commencement of these benefits is surely that research obviously has to precede plans for definite action. Research from its nature usually takes a long time. If any practical benefits are to accrue to industry in a period reasonably near the conclusion of hostilities, it is obvious that research must take place very soon otherwise the effect of the research, the resulting activities of industry will be long delayed.
The purpose of the Chancellor in giving the concession is to further the development of British industry. He has shown that he is very much alive to the urgent necessity, for example, of the development of our export trade. That depends upon our providing articles that other people want, upon our constantly being alive to improvements which are introduced and upon introducing fresh improvements ourselves. It is, to say the least of it, disappointing that the Chancellor, having brought himself to the point of agreeing that expenditure on research, as laid down in the Bill, can be set off against Income Tax, should postpone that benefit to some indefinite date in the future. He might argue, for example, that, if the Amendment which is being moved by the hon. Member for Chesterfield were carried, there might not


at the present moment be the people available to carry out the research. Nevertheless, there may be some available. No one knows what the effect of present operations against Germany may be, but later on there may be many more people available for civilian employment than there are now.
We do not want a further period to elapse before these provisions are put into operation. I cannot see how the Chancellor, having made up his mind to grant a concession, can reasonably object to seeing it put into operation. If people are not available, no harm will be done, the concession will not operate. Therefore I cannot see that the Revenue can lose anything and I ask him very seriously to consider whether the concession might not be applied either by fixing an early date or by doing what the hon. Member for Chesterfield suggests and put it into operation now.

Mr. Owen Evans: I wish to support the Amendment moved by the hon. Member for Chesterfield (Mr. Benson). One cannot see why the Chancellor of the Exchequer wants to postpone this concession, especially after he realises, as I am sure he does, the warm welcome which it has received from industry generally. The only point I wish to make is that it is now clear that very substantial expenditure Will have to be incurred by industry in research. It is not compulsory, but it is called for if industrialists are to do their job well and efficiently for the purposes of the war. Now, substantial expenditure is being incurred, for which no allowance is made for Income Tax or E.P.T. purposes. I suggest, therefore, that the Chancellor might give the Committee some idea of what is in his mind as to the appointed day, and how soon it will be. With this, is linked the point made by the hon. Member for Chesterfield with regard to the very substantial expenditure incurred in converting plant from war time to peace time conditions. I think some concession should be made to meet cases where very heavy expenditure is being incurred. I appreciate that some of that expense could be paid for properly by negotiation by the Government, as I know is being done in many instances, where it is called for by a Government Department. My right hon.

Friend the Chancellor of the Exchequer must know that while those negotiations continue indefinitely, interminable delay will he involved in putting these particular instruments down for the purposes of the war. I venture to appeal to the Chancellor to see whether he cannot offer some concession, and whether he will supply the real reason for postponing this matter indefinitely.

Sir George Schuster: I will not repeat the arguments that have been advanced in support of the Amendment moved by my hon. Friend the Member for Chesterfield (Mr. Benson) but I strongly support those arguments. I feel that the case is amply made out for opening the door to these concessions so that it may encourage research at once. I believe that my right hon. Friend must feel the force of that, too. I only want to explain the points which I would like him to clear up. I thought, originally, when I listened to what he was saying in the Debate on the Finance Bill, that he was, in fact, giving us all that we could possibly ask for; but, on rereading that passage, I am in doubt and I feel there is great obscurity on the matter.
We are concerned with two classes of new relief for research expenditure—that covered by Clause 26 and that covered by Clause 27. The former covers current expenditure and the latter capital expenditure. As I understand it the position taken up by the Inland Revenue authorities and by my right hon. Friend also was, that so far as current expenditure was concerned, the existing Regulations substantially allowed all genuine current expenditure on research to be treated as legitimate expenses, but that there was some possibility of doubt on certain points. Therefore, in order to avoid any sort of doubt my right hon. Friend proposed to put a Clause into the Bill so that there should be no further argument about any of these points of doubt. That, many of us welcomed greatly, but I want to point out that if the result of this Clause is to make all the existing deductions applicable now only after the appointed day, then, instead of giving us a benefit, that will on the contrary make the situation much worse. Apart from that point, when I reread my right hon. Friend's words in the Debate on the Finance Bill, it seemed to me that he had really in mind capital expenditure, and that is the point which I want cleared up.
I do not agree with the hon. Member for Chesterfield that he was talking about war expenditure, I think his words indicate that he was talking rather about capital as distinct from current expenditure. But I want to remind my right hon. Friend that in an earlier passage he referred to representations which had been made to him both before the Debate and in the Debate. He said:
The Board of Inland Revenue and I felt that there was weight in their representations made on those points…
Then there is this sentence at the end.
…When the appointed day comes, the outstanding part of that expenditure will qualify to be written off, as if it was expenditure incurred after the appointed day. If it is capital expenditure, it will be written off within a period of five years and we shall take steps to make that point clear."—[OFFICIAL REPORT, 23rd May, 1944; Vol. 400, c. 699.]
Does my right hon. Friend mean that the new proposal is that items which are to be treated as capital expenditure should all be allowed but must be spread over five years; therefore, if, say, £10,000 on an item of capital expenditure had been spent two years before the war, he would say "Well, there are three-fifths of that £10,000 to be written off after the appointed day, and you may now write it off at the rate of £2,000 a year but you will not have been allowed the full amount of the £4,000—the remaining two fifths in the two years before the war"? I am only raising the point for purposes of clarification, because as a matter of fact, I believe that my right hon. Friend in his heart wants what we want. Believing this, some of us put this Amendment down, in the hope that we would be able to give him an opportunity to say that that was really what he meant.

Mr. Edmund Harvey: I would like to say how much I hope that the Chancellor of the Exchequer will accept this Amendment, or indicate a very early date at which this very valuable concession will come into force. I want to make special reference to paragraph (c) which applies to money that is given to universities, university colleges, and research institutes for research work. It is, surely, of very great importance that the work should be instituted at the earliest possible date. We are, happily, we may believe, approaching the time when we shall get into the transition towards peace, and it is very im-

portant that plans and arrangements for post-war work and research connected with it should be undertaken without delay. The preliminary work, inevitably, must take time. Therefore, the very earliest date that is is possible to make this concession for work of that kind ought, in the national interest, to be fixed in the Bill, and I hope very much that Chancellor of the Exchequer will bear that in mind.

Sir J. Anderson: I am afraid I do not see my way to accept the Amendment but I hope that the information I am about to give will leave by hon. Friends without any sense of disappointment as a result of my decision. May I first point out that in the discussion which we have had, two quite different matters have been covered? The provision in Clause 26, to which the Amendments relate, is mainly a provision relating to revenue expenditure but not wholly so; it covers also, I would point out to the hon. Member for Walsall (Sir G. Schuster), certain items of capital expenditure. It may be convenient if I first explain in a few words why the provisions of Clause 26 has been thought necessary, seeing that revenue expenditure is already allowed under Income Tax practice as a charge upon profits.
In the first place, under paragraph (a) which is concerned wholly with revenue expenditure, there is a comparatively small part of expenditure which might not be covered by the existing practice—that is expenditure which, according to existing practice, might have been held to be too remote from the purposes of the trader's business to be brought in as a legitimate business expense. This Clause enlarges the conception of what is legitimate for that purpose Under paragraphs (b) and (c) of Clause 26, there is, I think, no extension of existing practice except in relation to capital expenditure. The effect of Clause 26, so far as (b) and (c) are concerned, is to bring in capital expenditure incurred by a research association which is not allowed now, at any rate, is not allowed if the expenditure is specifically earmarked for capital work. Under (c), similarly, capital expenditure incurred in a university institution is brought in here for the first time. Under war conditions there is very little expenditure of a capital nature being incurred for purposes of research, except in connection


with the prosecution of the war. There is no doubt that a great deal of current expenditure—expenditure of a revenue nature—is being incurred which is allowed under existing practice but, so far as capital expenditure is concerned, practically nothing is being incurred unless it is directly for the prosecution of the war, for the simple reason that labour and materials are not at present available for any other purpose.
I have been asked why I should bother about an appointed day if, in fact, capital expenditure is not being incurred now except for purposes of the war. I explained, as regards capital expenditure incurred for the purposes of the war, that the relief given by this Clause is really not immediately necessary because of the special war-time relief that is available under which the capital works in question can be written down at the end of the war to their residual value, but the explanation is perfectly simple. I have two reasons for not wishing to fix an appointed day now, or to bring this provision into force immediately so far as capital expenditure is concerned. There might be advantages in bringing it into force, although it might not be immediately used to any considerable extent, because it would be there ready against the time when expenditure can be incurred. My first reason may not appeal so strongly to hon. Gentlemen as it does to me. I do not want to put myself in the position of appearing to hold out an advantage by this Clause of which people cannot avail themselves because I think that will disturb people's minds, and will lend some additional force to a demand which I must contemplate and which I feel bound to resist, that where, owing to shortage of materials or for any other reason, a plan for capital expenditure on research cannot be put into force, the trader concerned should be allowed to earmark a sum of money out of his profits, have that exempted from taxation, and have it made available for expenditure at a later period in a later Income Tax year when the obstacles standing in the way of capital expenditure have been removed.
I have another reason, which is stronger, and it is this: There are strong practical reasons why the treatment of particular items of expenditure for Income Tax purposes and the purposes

of E.P.T. should be closely correlated; they may not be identical. I do not wish to make effective and operative provisions for dealing with capital expenditure for research purposes in relation to Income Tax until I have worked out appropriate provisions with regard to E.P.T. I hope to be able to work out these provisions in connection with the relief it is proposed to give for the development of industry in general in the course of the next few months, and that objection will fall to the ground. My intention is to fix the appointed day for the purposes of research as soon as the matter has assumed any practical importance, as soon as people begin to be in a position to expend any material sums of money on capital expenditure for research. Therefore, nothing will be withdrawn from the beneficiaries under this plan, which I am embodying in this Bill, by a postponement of the day on which it comes into operation. For these reasons I wish to retain in the Bill the provision by which these and other related Clauses come into operation upon the appointed day.
Before I conclude I would like to clear up a point put by my hon. Friend the Member for Walsall who, I think, misunderstood what I intended to convey in my Second Reading speech. In regard to expenditure that may be incurred now on research before the appointed day the position will be this: Between the time when the expenditure is incurred and the appointed day whatever provisions are appropriate with regard to writing off will apply. Depreciation allowances will be granted and there will be, at the appointed day, a sum still outstanding on the books of the concern. In so far as expenditure incurred on research has not been written off, the whole of that residual expenditure will be treated exactly as if the expenditure had been incurred after the appointed day. The whole of it will then be written off under the present Clause; it will not be apportioned arithmetically between the period of incurring the expenditure and the appointed day and the remainder of the five years still to run. The whole of the expenditure not written off will, as from the appointed day, come under the provisions of this Clause and will be written off over a period of five years—

Sir G. Schuster: An additional five years?

Sir J. Anderson: Five years from the appointed day. I think that meets my hon. Friend's point, and I hope that in the light of the explanation I have given my hon. Friends will not press this Amendment.

Mr. Lewis: The appointed day means such a day as Parliament may determine. I take it that in practice it means that the appointed day cannot be fixed in this Finance Bill. Supposing a great change in our circumstances comes about this autumn and capital expenditure on research is incurred between autumn and next spring, would such expenditure be covered? Would it be retrospective?

Sir J. Anderson: The effect of my proposals will be that any expenditure incurred before the appointed day will rank in so far as it has not been written off.

Sir G. Schuster: I, personally, have such confidence in the Chancellor of the Exchequer that I would not wish to press the matter after he has spoken as he has, and I have no doubt that my hon. Friend the Member for Chesterfield (Mr. Benson) will ask leave to withdraw the Amendment. I do, however, want to urge upon my right hon. Friend the very great importance of seeing that research work is started in good time. We know that a great deal is now being done in the United States and many of us have the feeling that British industry has dropped behind, and that our position after the war will be one of very great urgency. I am sure my right hon. Friend appreciates that, and I hope that he will use his influence in the Government to ensure that, in this very difficult question of the allocation of resources, research work on processes which will be required by this country after the war will receive serious consideration even in time of war.

Sir J. Anderson: I readily give my hon. Friend that assurance.

Mr. Benson: In view of the way in which the Chancellor has explained what he intends to do, I beg to ask leave to withdraw the Amendment. I take it from what the right hon. Gentleman said that we may expect the appointed day at a fairly reasonable time. All that is delaying it, it seems, are the technical problems to be worked out in relation to Income Tax and E.P.T., and when these

are finally and satisfactorily resolved the appointed day will be appointed.

Amendment, by leave, withdrawn.

Sir Wavell Wakefield: I beg to move, in page 14, line 41, after "trade," to insert "or profession."
Recently, I have drawn the attention of my right hon. Friend to the fact that inventors and others who make research their profession have not, as individuals, been able to secure relief for the expenses they have incurred in making that research or invention. The Chancellor, in reply to Questions I have put to him, has shown every sympathy, but I would like to suggest that it is not clear in this Clause as it stands whether or not an individual who carries out research, and from that research makes inventions, is, in fact, able to get the relief, which it is intended by this Clause he should have. The purpose of this Amendment is to ensure that a man who carries out research and makes inventions will be able to benefit by being able to claim expenses incurred in that way. It may well be that a doctor or consultant carries out valuable research work which costs him money. It seems, therefore, reasonable that he ought to be able to charge that expense against any gains or profits which he may make and I hope the Chancellor will favourably receive this Amendment.

Sir J. Anderson: I am sorry, but I cannot accept this Amendment. Its object is to enable professional men, as well as traders, to obtain deductions in computing profits for Income Tax purposes in respect of research expenditure of a revenue nature, and in respect of sums paid to approved associations, universities, colleges, research institutes and so on, carrying on research connected with their professions. That would be quite outside the scope of the proposals which I submitted to the House in my Budget Speech. I have no intention of extending the existing provisions applicable to expenditure which is not of a capital nature. If I were to allow contributions made by professional men to scientific bodies and institutions, as a deduction from professional income, I should get into exceedingly deep water. This is not a question of expenditure which is incurred for the purposes of earning income. That is the intention


of the concessions which I am making in connection with trade and industry. I wish to allow all expenses which can be properly regarded as having been incurred for the purposes of the trade which is being carried on. But if I were to accept the Amendment, and similar Amendments on the Paper, I should be allowing as deductions for Income Tax purposes, payments which are really expenditure of income.
Professional men contribute in all sorts of ways to scientific institutions, and their contributions as such have never been allowed as deductions for Income Tax purposes. The case of a professional man incurring capital expenditure on research must be a very unusual one if he was not carrying on a trade or business. While I have every sympathy with research in all forms, I still must pay regard to the importance of maintaining the integrity of the Income Tax structure, and this proposal would involve an inroad, not, perhaps, substantial from the point of view of money but, in principle, one to which I could not lend myself.

Mr. Wootton-Davies: Surely there are men who seek to invent and find things out, such as professional chemists and engineers. Are they to be excluded? Why not include purely professional men who set out to be discoverers?

Sir J. Anderson: The ordinary expenses of their professions will be allowed as deductions, but here we are dealing with contributions of all sorts and kinds, which I could not possibly admit. Reference has been made to inventions. The Committee is not concerned here with inventions as such. They are concerned with the antecedent research. If an invention results, and it is exploited, profits will come along, which will be dealt with in the ordinary way, and then the professional man may pass into the condition of a trader.

Amendment negatived.

Mr. Wootton-Davies: I beg to move, in page 14, line 43, after "related" to insert "directly or indirectly."
The object of the Amendment is to elucidate the position. As the Clause stands, I am left in some doubt as to what it will be. Are we all to remain

tinkers, or bakers, or grocers? Is our research to be entirely confined to the things we have in hand? Surely in times like the present, when we want to expand our trade, every aid should he given to a firm to expand and develop research. Is the Chancellor going to limit the coal miner to coal, or the petroleum man entirely to petroleum? Then there is the position, once again, of the small man. If a small man belongs to a research association there will be no difficulty, but suppose anyone started some research and found that he had to employ other people to conduct part of it, would that be allowed?

Mr. Edmund Harvey: I support the Amendment, and I hope, although the Chancellor's last speech seemed to cast a shadow over succeeding Amendments, this at least may receive substantial consideration. It is, surely, of the greatest importance that firms should be encouraged to conduct scientific research into the by-products of their industry, from which they have not been making any appreciable profit in the past but which may be of very great importance. Waste material may by careful scientific research prove to contain material of great value and importance and it is certainly desirable to encourage research. I hope, having that in view, and the other issues which have been raised by the hon. Member, the Chancellor may see his way to accept the Amendment.

Mr. Price: I should like to support the Amendment in order to elucidate just how far the Chancellor of the Exchequer will go in this matter, because I have a feeling that possibly the Inland Revenue might disallow expenditure unless they considered that it was directly connected with the profits of the concern. We know that the Chancellor is sympathetic to scientific research and he must know that it often takes a very long time before it bears fruit. It may even take years. I can quite conceive a company experimenting say, in research for the extraction of oil from coal. It might be regarded as being too near pure science and not sufficiently applied science. I want to see undertakings encouraged even to go into the realm of pure science, though this is mainly the work of universities and academic institutions, but still, if private undertakings will do the same, I


think they ought to be encouraged. Quite a lot of important work is being done on certain classes of foods, yeast foods for instance, which may be of extreme importance in the Colonies and in Central Africa, and may have the effect of raising the standard of life of the native people. It is being done, of course, in Government institutions, but undertakings concerned in food production and in chemical research might want to go into it, and it might be held that they are not directly concerned. I hope it will be made clear that the Inland Revenue will take a liberal interpretation of this.

Sir J. Anderson: This is another Amendment which I do not propose to accept. I earnestly hope that the cumulative effect of the answers that I am giving in regard to these Amendments will not give the impression, here or outside, that I am not entirely sympathetic. I am, indeed. But the Clause has been deliberately drawn to go as far as is reasonable in the direction that hon. Members desire. The words used are "related to"—not "directly related to"—and they could not very well be construed as meaning "directly related to," because a few words later the word "directly" appears—"related to the trade and directly undertaken." If it had been the intention that they should be construed as "directly related," the word "directly" would certainly have been put in. May I call attention to the provisions of Clause 30, the definition Clause, which are directly relevant in this connection?
references to scientific research related to a trade or a class of trades include

(a) any scientific research which may lead to or facilitate an extension of that trade or, as the case may he, of trades of that class;
(b) any scientific research of a medical nature which has a special relation to the welfare of workers employed in the trade or, as the case may be, trades of that class."

The only limitation that I desire to see applied to expenditure covered by this Clause—and this will govern the administration of the Inland Revenue authorities—is a limitation which would exclude expenditure which is not expenditure for the purpose of the trade or business so much as a mere contribution to a good cause. That, however worthy, is an application of income and not an expenditure incurred for the purpose of earning income. For these reasons I ask hon. Members not to press the Amendment.

Sir G. Schuster: Again I am prepared to accept my right hon. Friend's assurance, but I want him to do his utmost to see that that spirit is conveyed to the Revenue authorities. May I call his atteniton to one or two points? In Clause 26 (a) the reference is to "that trade." When we come to (b) it refers to "class of trade." I should have been much happier if the words in (a) had been "class of trade." I feel that a distinction between "trade" and "class of trade" may be used by the Revenue authorities as indicating a certain narrowness of intention. Then I should like to refer my right hon. Friend to Clause 30. I quite agree with him that the definition there is very wide, but I want to ask who is really to decide. The words used are "any scientific research which may lead to" certain things. It is very difficult in advance for a non-technical man to say, "This piece of research is likely or unlikely to lead to an extension of the trade." Very often a valuable discovery is an unexpected one. I should like my right hon. Friend to bear that point in mind in regard to the instructions issued to the Revenue authorities.
Then I have one final point. Judging by what has happened in the past, some of us, who have gone into this matter and have tried to get evidence from all over the country as to how things were working out, had the point very strongly made to us that, whereas large concerns like Unilever or I.C.I. could say that practically every kind of research work which they undertook was "related" to their business, because that covers such an enormous range, some smaller concerns engaged on only one kind of operation were in much greater difficulty in proving the connection. I think that indicates the sort of point where we want to see that these definitions are interpreted in a generous way.

Sir J. Anderson: I am quite willing to look into the point my hon. Friend has made about the possible construction to be placed on the words "trade" or "class of trade." They were not intended to be limiting, and in the definition Clause where it sets out that references to scientific research related to a trade includes certain things, that again is not intended to be limiting or exclusive in any way. They were put in because it was suggested that doubts might be raised


whether expenditure related to research outside the existing scope of the undertaking would or would not be covered. That is why the explanation was inserted. I do not think my hon. Friend need have any misgiving as to the spirit in which these provisions will be administered. It may not always be easy for a layman to decide the question whether a particular research is related to a trade or may result in an extension of the trade, but the Revenue authorities will have access to scientific and technical guidance in these matters. I have already indicated that in the administration of the existing provisions with regard to expenditure of a doubtful revenue nature and the expenditure by research organisations, the practice of the Revenue authorities has been to stretch the law to the utmost limit in order to encourage research. I do not think that there will be any backsliding in that respect.

Mr. Wootton-Davies: I hope that the Chancellor's officials will read and mark what he has said, and, in view of what he has said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

CLAUSE 27.—(Allowances for capital expenditure on scientific research.)

Sir G. Schuster: I beg to move, in page 15, line 28, at the end, to insert:
Provided that, if before the conclusion of hostilities or within twelve calendar months thereafter any person deposits with the Commissioners of Inland Revenue, in accordance with such conditions as may be laid down by them, any sum to be used as soon as practicable by way of capital expenditure on scientific research as defined in paragraphs (a) and (b) of this subsection, he shall be deemed to have incurred such expenditure for the purposes of this section.
This is rather an ambitious Amendment. From what my right hon. Friend has already said, I anticipate that he may raise objections to it, since I rather think he indicated that one of the reasons for not agreeing to an earlier Amendment was that he thought that might lead to this point being raised. I still, however, want to urge it on him. When we put this Amendment down we thought that a provision of this kind might help my right hon. Friend. It refers to research, but it might help him in a wider sphere to meet what we understood to be a difficulty

that he felt. If I interpreted rightly the spirit which animated his Budget speech, he definitely wants to encourage the making of timely provision for replacing plant and undertaking capital expenditure, but that he feels in a great difficulty about allowing sums which are merely put aside as reserves to be treated as deductions from profits. We thought that in this Amendment we had provided him with a means of getting over this difficulty. The sums would be allowed as deductions from profits subject to conditions which would be under the control of the Revenue authorities. The provision, therefore, could not be abused, but it would enable business undertakings to make timely provision in advance for expenditure which will have to be undertaken some time hence if they are to carry on their businesses or undertake research in a progressive way. I am sure that my right hon. Friend will appreciate the value of this and of having provision made in advance. I believe he will also appreciate that it is in the national interest that money should be set aside now for purposes which will have to he undertaken after the war. I therefore hope that he can give favourable consideration to this Amendment and that, if he is not ready to accept it now as an Amendment to the Finance Bill, he will consider the introduction of a provision of this kind in the special legislation which he contemplates introducing before the end of the year.

Mr. Price: This Amendment also contains an important principle about which the Committee should have a statement from the Chancellor. A situation might arise after the war which would embarrass firms that are anxious to carry out research work on important branches of science. The Chancellor indicated on a former Amendment that it is difficult for firms to obtain labour or raw material to carry on capital expenditure of this nature because of the war. At the same time, we ought to bear in mind the situation which will arise after the war if no provision has been made for putting money by to meet this expenditure. It is right that there should not be capital expenditure of this kind now, but how will it be possible for a firm suddenly to find a considerable sum of money when the war is over to carry out research work of a capital nature? Buildings, instruments, appliances and equipment are often very expensive, and it may not be


possible in a single year for a firm to be able to finance the expenditure. Therefore, it seems reasonable, provided there are safeguards against abuse, to enable firms to put by reserves into a special fund earmarked for the purpose of capital expenditure on scientific research after the war. That is the object of the Amendment, and I hope that the Parliamentary Secretary will be able to indicate that it will be possible to meet it in the immediate future if not now.

The Financial Secretary to the Treasury (Mr. Assheton): I understand the reasons for which my hon. Friend the Member for Walsall (Sir G. Schuster) and my hon. Friend the Member for the Forest of Dean (Mr. Price) have put forward this Amendment. My hon. Friend the Member for Walsall was right in suspecting that the Chancellor was not prepared to accept it. The Committee may recollect that on Second Reading my right hon. Friend made a reference which covers this point. Perhaps I may be allowed to quote what he said:
I do not think I could agree to any provisions which enabled firms to claim relief merely in respect of funds set aside or reserved, either for research or for industrial development. It is a vital part of my proposals that the relief to be given should apply when the money is actually used, either for research or for replacement of equipment, or new buildings, or whatever it may be."—[OFFICIAL REPORT, 23rd May, 1944, Vol. 400, c. 698.]
Although it may strike the Committee that the proposal which my hon. Friend has made is a constructive one, it is one which the Chancellor has considered carefully. I am sorry he was not here to hear the speeches made by my hon. Friends, but I will draw his attention to them.

Sir G. Schuster: I got the answer I expected, but I want to ask my right hon. Friend not to dismiss this point too lightly, I appreciate that the Chancellor does not want to give relief until the money is actually used, but the point is that, when the time comes when a firm is able to use the money, it might not have it. The Chancellor must take this into account if he wants to fulfil the purposes he indicated in his Budget speech. He must take account of the timing of the allocations which can be made. It is no use being allowed to make deductions from profits except at times when profits are available.

We thought that we offered a way in this Amendment. I see his point that money put to ordinary company reserves cannot be treated as expenditure. But what we propose is that the money should be deposited with the Revenue authorities and earmarked for certain purposes so that it would be impossible to spend it for other purposes. I cannot see why on the merits the Chancellor should not accept that. I recognise that it is no use pressing the Amendment now, but I can only repeat my request to my right hon. Friend to have this matter considered when he comes forward with his special legislation later in the year.

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Sir W. Wakefield: May I ask the Financial Secretary whether the words in Subsection (1), "a person while carrying on a trade," include a man who carries on a profession of research and then, as a result of his research, makes an invention? A man who does research might make an invention which might be related to one trade. He might then carry out research of a different character and make an invention related to another trade.

The Deputy-Chairman (Mr. Charles Williams): The hon. Gentleman has put his question, but he must not go back to an Amendment on a previous Clause.

Sir W. Wakefield: The point with which the Chancellor dealt on Clause 26 was in connection with allowing as expenditure contributions towards research bodies. I am making a different point. St is whether an inventor who carries out research for inventions which he makes as a profession is included in Clause 27 if he makes inventions which relate to a number of trades.

The Deputy-Chairman: That question can be asked, but when the hon. Gentleman began to develop it, I thought he was going back to the question of what is a profession.

Sir W. Wakefield: I only wanted to make clear the point I was trying to raise.

Mr. Assheton: It is not easy without going outside the Ruling to say much more. Normally, I do not think such a


point would be covered, but it must depend on the facts of the individual case. I can conceive circumstances in which it would be covered. If a man is carrying on business as an inventor, there might be circumstances in which he would be brought within this Clause, but it would depend on the circumstances and it would not be possible to make rules.

Sir W. Wakefield: Will the Financial Secretary look into this to see whether, on the Report stage, an Amendment could be put in to cover the point if it is not already covered? Otherwise, the principle which the Chancellor laid down in his Budget speech and on the Second Reading of the Finance Bill will not be fully implemented.

Question, "That the Clause stand part of the Bill," put, and agreed to.

Clauses 28 and 29 ordered to stand part of the Bill.

CLAUSE 30.—(Supple1nentary provisions.)

Mr. Ivor Thomas: I beg to move, in page 18, line 29, after "facilitate," to insert:
the maintenance, adaptation, improvement or.
My hon. Friends and I have put down this Amendment in order that the Bill may express more clearly what we think is in the mind of the Chancellor. I am fortified by reference to the Oxford English Dictionary in thinking that "extension" means primarily extension in space. I feel that that is not what the Chancellor has in mind, and for that reason we have suggested that "scientific research" should include research directed to the maintenance, adaptation, improvement or extension of any trade. The point, briefly, is that in any business there must be continual research if it is to adapt itself to changing circumstances. I think that the Financial Secretary will see the point at once. If he prefers any other form of words we shall, of course, be very happy to agree.

The Solicitor-General: I much sympathise with the motives that actuate the hon. Member, but if I explain one of the minor mysteries of drafting, he may understand the position. The definition Clause uses the words:
References to scientific research related to a trade or a class of trades include—

(a) any scientific research which may lead to or facilitate an extension of that trade.
"Include," in a definition Clause of a Statute, means "shall be extended to include." It postulates that the ordinary meaning of "scientific research related to a trade" stands as the commencement of your regard of the ratter. Our view—my view, for what it is worth to my hon. Friends—is that "scientific research related to a trade," in its primary meaning, does fully cover the maintenance, adaptation and improvement of the trade. That would be the primary purpose. The only need for the definition in Clause 30 is to extend it to what would not be the trade itself but might be an extension of the trade in the sense of developing it along new channels and new paths. I hope that my hon. Friends will not think that I interrupted in order to end the discussion, but I thought it might be convenient to give an explanation.

Sir G. Schuster: I wanted to rise to clear up that very point. At the risk of repetition I would like to have it underlined, because the Chancellor also made reference in an earlier discussion to the significance of the word "include" in the Clause. I seem to recollect that, in my early days when I studied law, we were warned that if you expressly include something you run the risk of being interpreted as having excluded something else about which you remain tacit. I do not know whether that rule applies to Parliamentary draftsmanship, but I would like to have it, clearly stated that the meaning of the word "include" here is that it brings in matters which might otherwise not have been included and that it certainly excludes nothing. It widens the definition.

The Solicitor-General: My hon. Friend is asking me to repeat what I said. I will repeat it with the greatest of pleasure.

The Deputy-Chairman: No, we cannot have a third repetition.

Mr. I. Thomas: In view of the explanation which has been given, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Woodburn: I would like to raise two little points with the Financial Sec-


retary. The first is in relation to the coming discussion on the White Paper on Employment Policy. Entire freedom is given to firms here, in regard to judging for themselves when they will indulge in capital expenditure. The question is, Are any steps to be taken to link up the Finance Bill with the proposals of the Government for ensuring the proper location of industry and the various other things that are contemplated in controlling capital expenditure to carry out the policy of full employment? If the Government are giving certain concessions, that is obviously a very important lever, along with other measures, in directing industries to certain districts or deciding when capital expenditure will be carried out. For example, it is proposed that capital expenditure should only be carried out—or, at least, it should be encouraged—during a period tending towards slackness in general industry and not during a period when the rest of industry is expanded to the full. Will steps be taken to link up the policy of using the Government expenditure and Government encouragement of expenditure, as a balancing factor between the proposals in the Finance Bill and the proposals which are coming along in—

The Deputy-Chairman: I am sorry to interrupt, but the hon. Member's argument seems, so far, to be directed to Clause 27. We are on quite a narrow Clause now, and we cannot go into the whole question.

Mr. Woodburn: I quite agree with you, Mr. Williams. The only point is that the later part of the Clause gives an explanation relating to this expenditure. The other point is whether, as a result of this definition of scientific research and of what is going to be allowed, it will be made possible for firms to discover entirely new things, and perhaps to develop monopolies. What steps will be taken to protect the public against monopoly prices and to safeguard the public interest in these matters?

Mr. Assheton: I think both questions are rather wide. I should not think the Committee would feel that the reference to expenditure as such was sufficiently wide to raise this question. If we were dealing with matters which are going to be brought forward by the Chancellor at

some time in the future, I could understand my hon. Friend raising the question. In this very limited field as to research, I should think it was hardly applicable. With regard to the second point, as to monopolies being developed as a result of this provision, I am bound to say that we cannot deal with it on this Clause. The whole question of what we are going to do about monopolies is being thought about, but this does not seem the occasion to discuss it.

Question, "That the Clause stand part of the Bill," put, and agreed to.

CLAUSE 31.—(Increase of standard profits in certain cases.)

Sir Arnold Gridley: I beg to move, in page 19, line 32, at the end, to insert:
or by five hundred pounds for each working proprietor in the trade or business whichever is the greater.
The Committee will no doubt remember that the present position is that a business which has working partners all actively engaged in it can have a minimum standard of £1,500 each for any number up to four. In the Clause as it stands, the Chancellor is proposing to allow an increase of £1,000 for one or more partners up to four. That improves a situation which gave rise to a good deal of anxiety. The Amendment which I am moving suggests that the improvement does not go far enough. I hope I shall not be thought ungrateful or looking a gift horse in the mouth, but the fact is that working directors are receiving in many cases less than they are paying to a manager or other chief officer in the business.
The effects of the Amendment would be that, in the case of one working partner, the position under the suggested addition of £1,000 would be precisely the same. One working proprietor would get £2,500. The same applies to two working partners, who would get £2,000 each. When we come to cases of three or four, a different position arises. Under the Clause as it stands, three partners would be entitled to an allowance of £1,500 each, plus one-third of the £1,000, in other words, £1,833 a year. Under the amended proposals, three partners would get £1,500 plus two, which is £2,000; that is to say, they would get only £167 more than under the


Clause as it stands. In the case of four working proprietors, they would get £1,500 under the Clause as it stands, plus a quarter of £1,000, which is a total of £1,750. By the amended proposals they would get £2,000 each, or £250 more than under the Clause. In other words, the total sanction which I am seeking is that the Treasury liability, which would be £7,000 under the Chancellor's proposals, should be increased to £8,000. That is not a very big thing to ask, and it would remove what are still felt to be injustices.

Sir Peter Bennett: I wish to support the case which has been put forward by my hon. Friend. This is not one of those Amendments of the Oliver Twist type, in which, having got so much, the sponsors say, "Please can you not give us a little more?" It has been put forward because in a considerable number of cases there will be a certain amount of difficulty if the matter is left as it is. The small businesses which are affected, with working proprietors, are very grateful indeed to the Chancellor for this concession, but it would be a very great help if, instead of putting it at £1,000, it is put in the way which my hon. Friend explained, in £500 steps. Of course, I cannot say with any honesty that on the average there is any chance of it costing less, because I am quite certain it will cost a little more. I do not think that on the average it will cost very much more, but we feel that it would give a very considerable relief in a number of cases in which there are three or four working proprietors, who have made a very considerable contribution to the war effort but are shut out, by the incidence of E.P.T., from getting any benefit from it. We would like the Chancellor to consider whether, in doing this very generous thing he has done, he cannot round it off in this way and make it more fairly applicable all round in a way which would be very much appreciated.

Mr. Tinker: I hope that the Chancellor will resist this appeal, because although my hon. Friend behind says that this does not mean much and is not like Oliver Twist, the whole trend has been for a little bit more to be given to the directors. I followed closely the arguments of the hon. Member opposite, and I gather his proposal was to raise the figure from £1,500 to £1,750—always on

the increase. It is evident it means asking for more from the Chancellor which will have to be met out of taxation. If that is so it seems to me to be highly unfair for such a proposal to be brought forward at a time like this. Everyone is expected to make some sacrifice—that is what taxation is for—and when these men are getting a good competence I cannot see for what purpose they will use this excess. To make an appeal for something more than £1,500 seems to me to be rather ridiculous. I hope the Chancellor will not give way.

Mr. Colegate: I think the hon. Member for Leigh (Mr. Tinker) has a little misunderstood the Amendment. There is no question of getting out of taxation. Any amount earned here—and it is earned—will be subject to taxation, like the earnings of everybody else. One must not look at these things as though the men were pensioners and getting a grant of £1,500 at the present time. They are men of the very type most essential to industry so far as new and growing industries are concerned. I know of several cases, especially in Birmingham and Wolverhampton, where two, three or four working men have got together; they have an idea they can work out. That is one of the main ways in which new industries in this country come into being. It is most important that every encouragement should be given to new industries in the post-war period.
The hon. Member asked a question which I will answer. He said, "What are the people going to do with this money? They have a competence." The usual thing for these men to do is to plough back into their growing businesses every farthing they can spare. If I had had time I should have liked to repeat the story of one or two industries in this country which I know, which have been built up by working men working long hours, ploughing back every penny into the business as it grew and expanded, until at last there was an industry giving employment to hundreds or thousands of men. This is why we do not want the position left as it is, because it is unjust. What the hon. Member for Leigh left out was the fact that some of these men are getting £2,500 a year. If a man starts a business by himself he gets it, but if two or three fellows get together and start a new industry they get less.


That is wrong. What we want is that the working proprietor, whether by himself or associated with others, should get more equitable treatment. The amount of money involved is very small. This money is earned by the men. It is only a question of how much the Chancellor allows them to retain of the money they are earning, which may be £10,000, £15,000, £20,000 or £30,000 a year. We say, "Give a little more." We say that these people are doing a wonderful job of work and that it is essential that they should be in a position to expand their industry and go on after the war.

Mr. T. J. Brooks: Why take it out of the firm if you want to put it back again?

Mr. Colegate: I agree that is a good argument. We want them to plough in as much as the Chancellor will permit.

Mr. Assheton: The point which has been raised by my hon. Friends is certainly one of substance, and I am obliged to the hon. Member for Stockport (Sir A. Gridley) for bringing it to the notice of the Committee. As more than one hon. Member has pointed out, the cost of the Amendment would not be very great. There are only a small number of businesses in this country with three or four working proprietors which come within the scope of Excess Profits Tax. I must confess that the natural sympathy I have with this Amendment is not reduced by what has been said here to-day. One point that my hon. Friend should bear in mind is that if this Amendment was accepted it would in fact provide somewhat differential treatment between a business with a personal standard and a business with other standards not based on profit. In spite of that I am bound to say that this is a matter which requires considering. I cannot advise the Committee to accept this Amendment as it stands, particularly because it is not limited to more than four partners in its wording, but we shall look at this matter before the Report stage. I will discuss it with my right hon. Friend and I will not fail to bring to his attention the remarks made by the hon. Member for Leigh (Mr. Tinker). In those circumstances perhaps my hon. Friend will be good enough to withdraw his Amendment.

Sir A. Gridley: We are quite willing that, between now and the Report stage, consideration should be given to this Clause, and to agree that the number should be limited to four. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Sir Waldron Smithers: I beg to move, in page 19, line 36, at the end, to insert:
(2) In the case of a business commenced after the first day of July nineteen hundred and thirty-six and carried on by a company the directors whereof have a controlling interest therein the standard profits in relation to any chargeable, accounting period beginning at or after the end of March nineteen hundred and forty-four shall if the company so elects (instead of being otherwise ascertained) be an amount arrived at by allowing in respect of each working proprietor in the trade or business (not exceeding four) the sum of one thousand five hundred pounds or a sum equal to the amount of remuneration which was payable to such working proprietor by the company, under an agreement made on or before the first day of January nineteen hundred and thirty-nine, for such consecutive period of twelve months ended not later than the thirtieth day of June nineteen hundred and thirty-nine as the company may select, whichever shall be the greater.
Provided that in relation to a chargeable accounting period which is less than twelve months the said increase shall be proportionately reduced so as to correspond with the length of the period.
The provision with regard to standard of profit contained in Section 13 of the Finance Act (No. 2) 1939, Section 13, Subsection (7) has been replaced by Section 27 of the Finance Act, 1940, and Section 13, Sub-section (2) has been replaced by Section 31, Sub-section (1) of the Finance Act, 1940. I read this out because I wish again to impress upon Ministers and their advisers the difficulty of the layman like myself as regards the law in trying to follow this intricate legislation by reference. It makes matters very difficult for us, and I hope something will be done to print the Clause, say in a White Paper. Here I want to say that I am proud that the hon. Member for Stockport (Sir A. Gridley) and his hon. Friend have also taken up the cudgels on behalf of working proprietors. I wish to put their case, which I think is really an injustice and demands serious consideration by the Treasury.
Under the existing Acts it is not possible in any circumstances to take the profits of any year later than 1937 as the


standard. In the case of a business commenced after 1st July, 1936, no profits standard can be taken at all. The standard must either be a percentage of capital—Section 13, Sub-section (6)—or the minimum standard fixed under Section 13, Sub-section (2) as amended by Section 31, Sub-section (1) of the Finance Act, 1940. This Section still operates unfairly in the case of a new business which, though started after 1st July, 1936, was prosperous before the war began. It is particularly harsh in its effect in cases where, before the war, the company was already paying remuneration for services to working proprietors which was on a commercial basis but was nevertheless greater than the standard allowable under Section 13, Sub-section (2) of the 1939 Act as amended by Section 31, Sub-section (1) of the 1940 Act. In such cases the position of the company and the persons receiving remuneration is now worse than it was before the war even though the business has greatly increased since the war began. The Amendment I have put down seeks to mitigate this hardship.
I am very anxious to be as brief as possible, but want to take a typical case as an example. I happen to know the people well and they are constituents of mine. I wish to impress on the Committee that it is a typical case. I am told there are many other similar cases, or perhaps not exactly similar. This is a company called Morphy-Richards, Limited, which is a director-controlled company, which was formed after 1st July, 1936, to carry on the business of engineers. As a result, it has no profit standard for E.P.T. purposes but is compelled to adopt one of the fixed minimum standards. The directors had a contract of employment entered into by agreement with the other shareholders of the company at the commencement of the business, which therefore had no bearing whatever on the war. These people are exemplary employers. They employ about 350 men and women in their works. Nearly all are constituents of mine. Further, as the hon. Member below the Gangway said in the discussion on the previous Amendment, these are two young fellows who started and by sheer drive and initiative produced goods, manufactured things, beat the foreigner and saved imports.
The progress of the company was extremely good. For the year ended 30th June, 1939, the turnover had reached, in

round figures, £106,000. The remuneration of the managing directors was £5,156. At the outbreak of war the directors made loyal and patriotic and strenuous efforts to obtain contracts for war production, but everywhere they met with opposition and Government restrictions. They were therefore reluctantly compelled to continue in the domestic market for a further 12 months. In spite of the restrictions and controls their drive and initiative increased the turnover to £172,000 and the remuneration of the managing directors rose to £7,107. Soon after the end of that year, 1940, the company succeeded in obtaining war work, and it set about closing down its peacetime operations, to concentrate on war production. This could not be achieved without a good deal of reorganisation of the factory, and at the end of the first year, ended 30th June, 1941, the output fell to £121,237 and the managing directors' remuneration dropped to £3,711, although the managing directors had to work harder to overcome war-time difficulties and restrictions. This is due almost entirely to E.P.T. It appears to be a grave miscarriage of justice. At the end of June, 1943, the turnover had increased to £212,968, and for the 11 months to the end of May this year it had exceeded £270,000. That is not the end of this story. Prior to the outbreak of war, the shareholders had regularly received a dividend, yet, in spite of the greatly-increased output, the directors feel unable to recommend distribution.
I have here a table, which I cannot convey by word of mouth to the Committee, but it shows the disastrous effect of the present taxation on these enterprising people. It should be emphasised that in the year ended 30th June, 1939, a commercial profit of £15,000 was made, of which £7,300 was required for taxation leaving a balance for the company amounting to £7,619. On the other hand, by increasing its efforts for the benefit of the war, the company made a commercial profit for 1943 of £33,000, out of which no less than £31,000 was required for taxation. The company is left with £2,060 for its patriotic endeavours. Surely, there is something wrong when the law requires a business to hand over 93.8 per cent. of its profits to the Government. Surely it is quite wrong that businesses which have been established for a number of years should be allowed to retain a large


proportion of their profits while the younger firms are placed in a quite unjustifiably disadvantageous position. Is it not time that the new businesses were put in a position at least approaching that of the older firms? Is it not a principle of good taxation that each person should bear his just proportion of the burden, according to his needs? In this matter that is very far from being the case.
I have the table here, and I want to make reference to two points in it. In 1943 the commercial profits were £33,154, and the total taxation payable was £31,094, leaving a balance, after paying taxation, of £2,060. The managing directors, as has been stated by my hon. Friend the Member for Stockport (Sir A. Gridley), pay Income Tax on what they receive, but this small amount of £2,060 all told has to bear the cost of all items not allowable for taxation purposes, such as capital improvement, War Damage Contribution, war risks, and business insurance. Here we have a typical example of men who are assets to the country, who have shown drive and initiative, being pressed down, and being far worse off than they were before. To show how these people managed to build up the small business, the commercial production in 1943 was worth £212,968, and in 1939 it was worth £106,849. But there is no discrimination between the small workshop, which started during the war to make munitions, and a director-controlled company, which built up during the three years preceding the war an annual turnover of £230,000, purely on production. It is hard to understand why, in a director-controlled company, the directors' incomes are not regarded as a worthy expense for E.P.T. purposes. There is, I submit, gross injustice when one firm loses thousands of pounds pre-war through mismanagement, and has its profits revived through war work, while an efficient firm is completely stripped of all its resources, and compelled to dispose of a large proportion of its assets to its big business competitors, in order to keep going.
I feel very deeply about this case. It has now been going on for some years. I am pleading only for justice, to give these splendid men and others like them some hope for the future. Men of this kind who, through using their brains and

initiative and employing people at good wages, have built up businesses, are the best asset the country and the Chancellor of the Exchequer have got. By continuing this injustice, the Chancellor of the Exchequer is killing the goose that laid the golden egg. This incidence of E.P.T., of which I have given a typical case, is an oppression and an injustice, which causes suffering, bitterness, and anger. The proprietors of undertakings—and this is an important point for the future of our country—will not dare, in future, to risk developing all their resources in this country, if they feel that they are not going to be justly treated. These are loyal people, anxious and willing to pay their full share towards the conduct of the war. They are honourable men, of high integrity; and I beg the Financial Secretary to convey to the Chancellor and his advisors the suggestion that they should consult the experts, and not confine their inquiries to lawyers and accountants. I want to show what are the kind of difficulties that this firm has experienced. The firm received a letter from the local tax collector, in rather strong terms. The letter said:
I now require an undertaking that they"—
that is, the company—
will allocate all, or a large percentage of the next cheque received in settlement, or on account, of work completed under a Government contract. This undertaking is required"—
I beg the Committee to note this sen-tence—
as I am unable to agree that further payments on account, or in settlement, of Government contracts be retained or expended in acquiring stocks or material for future operations.
"Future operations" were vital war work. Then comes the veiled threat:
I trust that it will not be necessary to raise the question of enforcing settlement, but this point must be considered.…
This demand for payment was made. The company could not pay their taxes, because of the conditions imposed under the law, and the senior partner, in the course of his reply, said:
In short, all our available resources are now harnessed to the war effort, and we require the highest possible authority to make the decision that the payment of revenue, in our exceptional circumstances, is of such importance that we must seriously curtail our output of war material.


I think the Treasury should instruct their local tax collectors not to take such drastic, or far-reaching, action without authority from higher up in the Treasury. We often hear of British justice. In the case to which I have referred, which is a typical case, injustice is being suffered. If British law is based on an injustice, it will certainly come back on the heads of the Treasury and of the country.

The Solicitor-General: One cannot help sympathising with the deep feeling which my hon. Friend has put into the presentation of this case, but I have to ask the Committee to distinguish between two matters, which are absolutely distinct. One is the severity with which 100 per cent. Excess Profits Tax falls on the taxpayer; the other is the question of whether there is injustice, that is, whether the distribution of the burden of the taxation is unjustly managed. If the Committee will bear with me, I will endeavour to explain the position which causes such a case to arise. As my hon. Friend explained, the company to which he directed most of his remarks has no profits standard. The Committee will appreciate that the basic idea in an Excess Profits Tax is that you compare one period during the war, when the excess profits are being made, with the chargeable accounting period of a pre-war period, and take your 100 per cent. of the difference. The pre-war period which was selected and approved by the House was 1935 or 1936, or the average of 1936 and 1937, in every case taking in the first part of 1936.
If a business or a company did not exist before 1st July, 1936, that period could not be taken in, and, therefore, we had to devise some other method of calculating the first standard, which is subtracted from the profits period during the war. They are given the choice of a minimum standard of £1,000, or if they are working proprietors, £1,500, for each working proprietor up to four, or else a calculation on their capital, allowing for increases and decreases. Therefore, a company like that to which my hon. Friend referred goes to the working proprietors standard, and gets its 1,500 per working proprietor up to four, and it can get, in addition to that £6,000, a discretionary allowance from the Revenue, according to the nature of its work, up to another £1,000 per working

proprietor. In addition to that £1,000 per working proprietor, my right hon. Friend proposed a flat rate addition of £1,000 for every business dealing on the non-comparison of profits standard, and that is the position.
The reason for that, and I am sure the Committee will appreciate it, is to make the small company, the director-controlled company, where the directors own the majority of the shares, in line with the partnerships with which it is very comparable. The objection of my hon. Friend here, that there should be an alternative standard for Excess Profits Tax, either of whatever is given to the working proprietors, or any pre-war remuneration which had been agreed by the people in the business, would, of course, destroy the equal comparative incidence of taxation, between the partnership and the company of this sort. If the partners, who are not allowed, of course, to deduct any remuneration, are to be dealt with on this working proprietor basis, and a company, like the one referred to, is to be entitled to take into account any pre-war remuneration which they had arranged, you will not cure any injustice. You may cure some of the severity for this company, but you will promote injustice, because you will not have the same method and incidence of taxation for the different structures of firms and companies that obtain. That is the point which I would ask the Committee to consider.
Every one who has to deal with these cases appreciates the difficulties which arise. Of course, my hon. Friend will be the first to realise that a greater difficulty arises if you make agreements, or if you had agreements made before the war, by which you arrange your remuneration to your managing directors on the basis of salary and a percentage of profits, the profits to be taken before the Excess Profits Tax is paid. As early as 1937, we had the National Defence Contribution, and it was clearly to be seen that forms of taxation of that kind had come to stay. Therefore, although one feels sympathy, one realises, at the same time, that an agreement made on that basis of taking your profits before taxation is paid, is one which may cause considerable trouble, and may well have been anticipated to muse considerable trouble in 1937, 1938 and 1939. Therefore, I must say to my hon. Friend that, while I


sympathise with every one who has to carry the burden of taxation, and while I sympathise with the admirable presentation of the case of his constituents which he gave to the Committee, the duty of those who have to decide as to these methods of taxation, is to keep the incidence fairly between the different kinds. I cannot, therefore, nor can either of my right hon. Friends, recommend to the Committee the alteration which he suggests, because the result would be that the incidence of taxation would be unfairly affected. I therefore ask my hon. Friend not to press this Amendment, and, if necessary, I ask the Committee to reject it.

Sir W. Smithers: I thank the Solictor-General for his very sympathetic reply. May I just make this remark? The hon. and learned Gentleman referred to the 100 per cent. E.P.T. standard. I am one of those who believe that, if he reduced that first, he would get more response. I do not think the hon. and learned Gentleman dealt with the point of the unfairness between the small firm which was brought into being before the date, and the firms already in being. I do not think he said anything to answer my argument about the injustice, and I still would ask him to look into the question again and see if he cannot make some suggestion for these people, who are really having their businesses ruined. The hon. and learned Gentleman talked about the managing directors getting a salary and some share of the profits, but, owing to the incidence of this taxation, there are no profits to distribute and they are thrown back on their salaries. I make the most urgent appeal, because, although this may affect only one or two cases, the extent of the injustice is sufficient for me to press the matter again. If the injustice is caused to only one British subject, the hon. and learned Gentleman should see that it is ended.

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Woods: I have every sympathy with the aims of the hon. Member who moved the last Amendment, because I feel that, in many ways, a problem is created for many businesses who have no comparable standard for

E.P.T., or who were in depressed areas, or are, in various ways, handicapped. The hon. Member who moved the Amendment stated, although I do not agree with him, that old firms are in an advantageous position compared with new businesses. I think the Chancellor will agree that probably the boot is on the other foot, and that businesses which have started since the war, or which started just before the war, and do not come into the period for the calculation of E.P.T., can thus be assessed on capital basis. The capital basis for them is 8 per cent., whereas the allocation of older businesses which prefer to be assessed on the capital basis is only 6 per cent., and this seems to me to be a serious anomaly. On another Clause, the Chancellor justified the rearrangement of E.P.T. on the basis that certain firms have come into industry, where it was necessary to tighten up the collection of the tax and have some security that E.P.T. would be paid. A firm of that type which has come into business and—

Sir J. Anderson: It was Purchase Tax, not E.P.T.

Mr. Woods: I know, but here are firms where it is necessary, because of their practice, to tighten up Purchase Tax collection, and firms of that type are entitled to be assessed for E.P.T. on the 8 per cent. basis, whereas the old established firms—

The Temporary Chairman (Sir Cyril Entwistle): I am afraid there is nothing about the capital basis in this Clause. Perhaps the hon. Member will confine his remarks to the Clause itself.

Mr. Woods: I apologise for being out of Order, but, in this Clause, there is a concession for small firms where E.P.T. practically eliminates their profits. I ask the Chancellor to look again at the anomaly created by the fact that some firms are assessed at 8 per cent. while the older established businesses, many of them small businesses, are assessed or the 6 per cent. basis. I suggest that, while he is making modifications from the experience of the working of E.P.T., it would be desirable to consider making further modifications to meet that anomaly.

Mr. Hammersley: I would like to ask a question which I raised


on the Second Reading. It deals with the precise interpretation of the words:
Must be ascertained otherwise than by reference to the profits of a standard period.
Generally speaking, the standard profit is ascertained either by reference to profits in the past or by reference to capital, but there is another class of case where you have an ascertainment of standard profits by reference to a substituted capital standard, which arises in this way. Capital for the purpose of the Act is defined in a particular way, and, in certain businesses, there has been some dispute as to what is and what is not capital. Therefore, there has been a grievance, particularly in the cotton trade, on the ascertainment of the standard by reference to what is called the substituted capital standard. I asked in the early stages of the discussions on the Bill whether standards ascertained in that way were eligible for the additional £1,000, and I understood that it was so, but, for greater certainty, I would like to repeat the question now.

Sir J. Anderson: The Financial Secretary said to me, rather pathetically, that he had already given the answer once, but perhaps I had better give it now. Certainly, the £1,000 is added in the case of all businesses that have a standard other than the ordinary profit standard, that is, the substituted capital standard, the minimum standard, the working proprietor standard, and so on. If I may say one word about the point made by my hon. Friend opposite, on the difference between the percentage allowed on old capital and new capital, in the one case 6 or 8 per cent., and, in the other, where the business is a company of the ordinary kind, 8 per cent., or in the case of a partnership, or a director-controlled company, 10 per cent., that difference was introduced with the deliberate object of giving some encouragement to the investment of new capital in businesses, and the argument for that difference is as valid to-day as when the decision was first taken.

Sir Robert Tasker: Regulations are issued when the Inland Revenue or the Chancellor or the Treasury find themselves in difficulties, but should we not insist that it is desirable to do justice? Regulations number thousands, and, if regulations can be issued in the interests of the Treasury, I respectfully suggest

that they can be issued in the interests of justice.

Question, "That the Clause stand part of the Bill," put, and agreed to.

CLAUSE 32.—(Tax avoidance.)

Sir W. Smithers: On a point of Order. May I respectfully suggest, as the Amendments on Clause 32 are interlocked, that you would be good enough, Sir Cyril, to take the views of the Committee to see if we cannot have a general Debate and then move the Amendments formally afterwards?

The Temporary Chairman: I think the sense of the Committee will be to discuss them all together on the Motion, "That the Clause stand part of the Bill."

Mr. Craven-Ellis: I beg to move, in page 21, line 27, to leave out from "effect," to "as," in line 28.
This is a retrospective Clause, and I submit to the Chancellor of the exchequer that, having regard to the fact that Section 35 of the Finance Act, 1941—which this Clause seeks to amend and bring back to the state that it was in originally—is quite adequate for the purpose of dealing with evasion, to make this Clause retrospective is opening the door to a very great deal of difficulty and possible litigation. It is true that the cases which have been before the Commissioners may, probably, not be reviewed, but there must be thousands of cases which may well be reopened if we allow this Clause to pass. Opening the door for a large number of cases to be reviewed, will upset the whole financial position of many companies. Many companies have paid their dividends, have contributed to their reserves and have paid their tax, and it seems to me that, if there had been cases which justified review and submission to the Special Commissioners, they should have been dealt with now. Surely the inspectors of taxes, who are very live men, are not going to allow a company to avoid taxation when there is a legitimate reason for its paying tax. I move this Amendment because I feel that to reopen these cases would be extremely dangerous and detrimental to our whole system of taxation. It would undermine the whole understanding of justice and, therefore, with the strongest recommendation, I submit my Amendment for approval by the Chancellor.

Mr. Levy: I think the majority of the Committee will agree that if under a Finance Act, commercial firms, legally and properly, merge their businesses with other businesses, and have their accounts properly audited and examined by the Inland Revenue authorities and those Inland Revenue authorities are satisfied that such accounts come within the ambit of everything that is honourable and right, it would be wrong if engagements and settlements made by Inland Revenue authorities were not sacrosanct, but were open to retrospective legislation. To say that that which was perfectly legal and honest is, now, by retrospective legislation, to be deemed dishonest, because it is argued that the businesses so obtained were obtained for the purpose of evasion of tax, is unjust, If it were true that such businesses were acquired for the purpose of evasion, then the Inland Revenue have powers to take the matter to the courts. If it is proposed to reopen every case, in order to find out whether the main purpose was the avoidance of tax, and to reopen every account that has been audited and settled for the past year, then I think that this Committee ought to be very careful before they deal with such retrospective legislation.
If my recollection serves me right, this point was raised in 1940. If evasion had taken place, which was not considered to be honourable, why were not the regulations tightened up in 1941? Why did not the draftsmen do something in 1942 and 1943 instead of coming back now, in 1944, and talking of retrospective legislation? If retrospective legislation is to be the vogue for the future, no settlement can possibly be sacrosanct. There will always be the danger of the reopening of the matter, on some future occasion, even after funds have been distributed. In the event of the auditors of the Inland Revenue coming to the decision, rightly or wrongly, that the main object in 1941 and 1942 was evasion—even though it was perfectly legal and was passed by their own auditors and agreed to by their own authorities—the Inland Revenue can come back and demand a refund of the moneys which have already been paid out, moneys properly and legally disbursed to the shareholders upon which the Chancellor of the Exchequer has already received 10s. in the £. Then he comes back again and says, "We want you to

refund this money." There may be some reliable firms, who, unfortunately, have not the money available, and to them the Chancellor will properly say, if this provision is passed, "We have to collect it," and they will have to go bankrupt in order that the money can be paid.

Mr. Kirkwood: Does the hon. Member say that the Chancellor of the Exchequer has no right to go after this crowd of individuals who have carried on this racket?

Mr. Evelyn Walkden: It is cheating.

Mr. Levy: I am not defending cheating. I am putting a point of substance and principle to the Committee. I am dealing with ordinary business firms who make up their accounts in the ordinary way and who have, quite properly, bought other businesses. This does not apply to myself and therefore I am not prejudiced. I have no self-interest and no axe to grind. I am speaking in the interests of the business community as a whole, and any arrangements arrived at by my right hon. Friend and his officials should be sacrosanct when once they are made and agreed to by this House. I do not like retrospective legislation, and I think that the majority of the Members of the Committee will agree with me. It creates uncertainty in the minds of everybody. After the annual balance sheets have been made up and passed by the auditors, and have been examined and agreed to by the Inland Revenue that authority comes back with retrospective legislation. They say, "It is true that you have acted legally and have done nothing that can be described in any way as being even shady, but now, by this retrospective legislation, we are going to reopen all these accounts and go into everything that has taken place to see if, by a wide stretch of the imagination, it can be suggested that it was done for the purpose of evasion."
I do not like the word "evasion" applied in cases where there was a perfectly honest commercial transaction. It is not right, when people have been carrying on their businesses legally and honestly, to come back to them in a few years' time and say, "You had criminal intentions," and "It was a complete evasion." The 1941, 1942 and 1943 Finance Acts were passed without any


effort being made on the part of the draftsmen to put the matter right. Yet in 1944 they bring in retrospective legislation which, I am certain, does not appeal to Members of the House of Commons and their constituents. We have to see that not only is justice done, but that it appears to be done. This retrospective legislation may affect a number of constituents of every hon. Member and no fault can be laid at their door. The fault lies with the drafting of the Measure. However stringent a Clause is made in the Finance Bill nobody will object if its object is to prevent that which is wrong taking place in the future. Therefore I appeal to my right hon. Friend to omit that part of the Clause which is retrospective, and to tighten up the Measure as far as he can, if it is not tight enough, by bringing in fresh Clauses on the Report stage. But do not let him make criminals.

Mr. Gallacher: They are criminals, anyhow.

Mr. Levy: If such criminals exist, they should be dealt with in a court of law. Nobody will object if my right hon. Friend tightens up his Finance Bill, in order to prevent evasion, but he is now taking a step which will be resented throughout the country. In order to find out whether evasion has or has not taken place, there must be a re-investigation of all the accounts, which may run into hundreds of thousands of pounds. Who is to be the judge? [Interruption.] I am not trying to be provocative. I am putting forward, to the best of my ability, an honest and sound case. This is not a party issue.

Mr. Kirkwood: It is a party issue.

Mr. Levy: I am putting the position to my right hon. Friend with very great respect. He is a very able man and he knows the evils of this sort of thing. I am prepared to admit that he will be able to bring forward examples of mergers, and of businesses that have been taken over for the purpose of evading Excess Profits Tax. I will accept all that, but what they did, rightly or wrongly, was legal—it came within the framework.

Mr. Gallacher: It was immoral.

Mr. Levy: If it were not legal, then the authorities had sufficient power to take it to the court, and charge the people

concerned. Therefore, I am asking my right hon. Friend to reconsider the retrospective part. It is true that some of these so-called criminals, people who have evaded, will get away with it but, whatever may be said to the contrary, probably before they did it, they had advice from the legal fraternity of which my hon. and learned Friend is such a distinguished member. If he were not in the position he is in to-day on the Treasury Bench but was engaged in public practice, some of these firms might even have sought his advice as to whether what they were doing was legal and I think, with his knowledge of the law, he would have said, "This is perfectly legal. There is nothing dishonourable or wrong with it." Therefore, it might have been on his advice that the merger would take place, and if he had advised to the contrary it probably would not have taken place. I suggest we ought to think a good deal before we pass this Clause which implies that that advice was wrong and ought to be retrospectively treated. I am asking my right hon. Friend to reconsider the repercussions throughout the country so far as industry is concerned. If an agreement has once been arrived at, definitely and conclusively, with his own officials, then that enactment and contract and agreement should remain sacrosanct.

Mr. John Wilmot: I venture to think that when the hon. Member for Elland (Mr. Levy) reads his speech in HANSARD to-morrow he will he rather sorry he made it, and I am sure that his friends must be sorry too. He will know, as we all know, that when auditors audit accounts of a company or a group of companies, they do not certify that everything which is being done is honourable, They certify that the accounts conform with the books and papers of the company as produced to them, and I feel sure the hon. Member is not serious in contending that, at this time of all times, Parliament has not the right to take steps to stop tax evasion when honest people are paying their due.

Mr. Levy: I am not suggesting that.

Mr. Wilmot: That was the suggestion. We all of us know that in this business of hawking round companies for sale, the only attraction to the buyer is the fact that it will excuse him from some pay-


meat of Excess Profits Tax on another business, and it has been a lucrative line of trading to rather questionable characters in the City.

Mr. Craven-Ellis: Does the hon. Member deny that Section 35 of the Act of 1941 as it stands, would allow such, conduct to escape the attention of the Inspector of Taxes?

Mr. Wilmot: I am not really qualified to express an opinion on that, but if it were not necessary the Chancellor would not have brought forward this Clause. It is to stop this very thing, that the Clause is intended.

Mr. Levy: The Chancellor's Clause certainly will have the effect of stopping it for the future, if he tightens it up sufficiently, but I am talking about the retrospective part of it.

Mr. Wilmot: Is not the Chancellor always in the difficulty that unfortunately there is employed far too much ingenuity in finding loopholes in the law, as soon as the law is strengthened, and the Chancellor is driven to this retrospective legislation in order, amongst other things—and I think the hon. Member for Elland should reflect on this, if I may say so with respect—that honest and honourable and patriotic businesses shall not be penalised and put at a disadvantage by people of another kind. I cannot help feeling that all who are doing their utmost to pay their taxes and conduct their businesses on honourable lines, will thank the Chancellor for taking steps to remove advantages from those who have done otherwise.

Mr. Lewis: I must confess I view with considerable anxiety the amendment of Section 35 of the Act of 1941, which this Clause proposes. The position could fairly be described in this way. The Law Officers of the Growl have not advised the Treasury very well, and other lawyers, cleverer than they, have come forward and found loopholes which the Law Officers of the Crown did not foresee. What is the remedy for the Chancellor of the Exchequer? Surely his remedy is very clear. He can tell the Law Officers of the Crown about it and he can come to the House of Commons and ask for an altered form of words to operate in future, which he is doing, and to which I think no one raises any object-

tion. But is there any reason why the Chancellor should go beyond that, and ask that this form of words, which is to be applied in future, shall apply retrospectively? I think that is open to very great objection. I feel certain that the Chancellor himself will agree with me that in taxation one of the most important things is that the liability of the taxpayer should be precise and definite. How can the liability of the taxpayer be held to be precise and definite, if nobody knows whether the law under which he is paying the tax is not going to be altered retrospectively in a few years' time? That is building up on an utterly insecure foundation. I ask the Committee to consider that point of principle for a moment.
I might be asked: Would you go so far as to say that retrospective legislation in the matter of taxation cannot in any circumstances, be justified? To that I would say: Can the Chancellor of the Exchequer stand at that Box to-day and tell the Committee that, owing to the unfortunate advice he received from the Law Officers, he has received seriously less revenue than he estimated for, and his Budget for the year as a consequence has been upset—in other words that the loss through the law not having had the effectiveness which the Law Officers thought it would have has been of a very serious degree? I do not know, but I venture to suggest that the Chancellor could not do anything of the kind. I do not believe he could name any figure of a loss incurred through such advice, which he now hopes to recover by making the legislation retrospective. If he can, well and good, but, as I say, I do not think he can. He may say vaguely, "There are lots of cases." Yes, but to what do they amount? We are asked to do a very serious thing; we are asked to tell a man that whereas we said two years ago that the law was so-and-so, we did not mean it. We ought not to do that without very grave reason, and I challenge the Chancellor to give to the Committee a substantial reason.

Mr. Benson: I am very glad indeed that the Chancellor has made this Clause retrospective. For many years this House has been dealing with tax avoidance, which is quite a different thing from tax evasion. Year by year, we have had Clauses in our Finance Bills which attempted to stop leakages in the collection of tax due to the fantastic in-


genuity with which tax avoiders arranged their affairs. We have had to stop more and more loopholes, and as we have done that, the methods of the tax avoiders have become more and more complicated. I doubt whether it will ever be possible to prevent tax avoidance in its entirety. There is always some ingenious person who will find a way round, if he cannot find a way through. For the last to years, the Chancellor of the Exchequer has threatened, time and again, that if these ingenious practices were continued then any legislation which was introduced to stop loopholes would be made retrospective. [An HON. MEMBER: "It is all wrong."] It may be wrong, but is it suggested that persons should be allowed to indulge in these ingenious practices and "get away with it?"
It was once said by a judge that every taxpayer is entitled to arrange his affairs in such a way as to attract the minimum of tax. That dictum has never been accepted by the House of Commons. It has been accepted only by some Members, and I trust never will be accepted by the House as a whole. I am glad that the Chancellor has given a warning to tax evaders that they will not in future "get away with it," as they have done in the past. In many cases, it has been worth while practising a tax avoidance scheme, because the sums involved have been large, owing to the knowledge that it would be stopped later. One method of preventing tax avoidance is to see that no one "gets away with it" between the time a scheme is evolved, and the time it is scotched by legislation. The hon. Member for Elland (Mr. Levy) asked why this Clause was not properly drafted in 1941. The same point was raised by the hon. Member for Colchester (Mr. Lewis), who said that the Law Officers of the Crown had given the Chancellor bad advice. They did not; it was an Amendment forced on the Chancellor from the opposite side, that weakened the Clause. The hon. Member for Elland said that this was not a party matter, but it is getting very near it. You will not find any Members of the Labour Party attempting to weaken this Clause; you will find that among a limited section of the Tory Party. [HON. MEMBERS: "NO."] Yes, you will, if you look at the record of past voting.

Mr. Levy: Is the hon. Member casting aspersions on the honour and integrity of the Tory Party as a whole?

Mr. Benson: I did not refer to the Tory Party as a whole, and I am casting no aspersions. I am merely pointing to facts. They may not please the hon. Gentleman but nevertheless they are the facts. If Members look at the voting lists, on these various attempts to weaken tax avoidance legislation, they will find that those who have invariably weakened it, come from a small section of the Tory Party.
What does this Clause propose to do? It proposes, practically, to put the legal position back as it would have been, had the 1941 Clause been carried as it was first drafted, without the weakening Amendment which was introduced from the other side. If the hon. Member looks at the Paper, he will find that, even now, there are attempts by members of the Tory Party to weaken the effort made to strengthen this Clause. It is no use saying that it is not a party matter; it is a party matter. It is no use saying that the House has accepted the dictum that a man should not pay tax if it can be avoided. Therefore, I am glad that the Chancellor has made this legislation retrospective, and has warned the people who use these devious and fantastic methods to avoid tax that they will not be allowed to "get away with it" in future.

Mr. Quintin Hogg: In spite of the assurance of the hon. Member for Chesterfield (Mr. Benson) that this is purely a party matter—

Mr. Benson: I did not say that. I said, "nearly a party matter" and applied it to a section of the Tory Party, the impure part of the Tory Party.

Mr. Hogg: I do not know anything about my own purity, and I should not like in this place to raise any matter regarding it. In spite of the hon. Member's suggestion that this is nearly a party matter, I find myself forced to ask the Chancellor to stand his ground for a rather narrower reason than that suggested by the hon. Member for Chesterfield. I had a great deal of sympathy with the argument of my hon. Friend the Member for Colchester (Mr. Lewis), but I cannot help thinking that my hon. Friend the Member for Elland (Mr. Levy) will, on reflection, think that he has not argued his case in such a way as to assist his side. He went


a very long way. His contention was the intelligible one that what is legal, should be allowed to stand simply because it is legal, and in any circumstances; in other words, that persons who, in the middle of the greatest war in history, devote their ingenuity to finding loopholes in the Bill should be permitted to "get away with" what they have done. Well, whatever the merits or demerits of this Amendment, that is a proposition which no honest man can accept. It seriously affects the honour of those who put it forward, and it must be resisted at all costs.
The history of this matter, which I have been at some pains to look up, is as follows. In 1941 a fairly wide Clause of this nature was proposed, and in response to perfectly proper pressure which was brought at the time it was narrowed down to the present form of Section 35 of the Finance Act, 1941. At that time, the then Chancellor of the Exchequer, and his Financial Secretary, clearly enunciated the view and warned tax avoiders, that should the Clause prove too narrow, an amending Clause would be brought in in a subsequent Finance Bill, and if I am not mistaken the then Financial Secretary said that such an amending Clause would be retrospective.

The Solicitor-General: The Solicitor-General indicated assent.

Mr. Hogg: I am glad to see that my hon. and learned Friend confirms my recollection. In those circumstances, the argument which ordinarily applies to retrospective legislation, cannot seriously be advanced in this case.

Mr. Lewis: My hon. Friend will appreciate that a mere Government statement to the effect that they proposed to introduce certain legislation would not bind the House of Commons afterwards. We are now taking the responsibility for doing this, and my hon. Friend cannot get out of it by saying that the Government said some years ago that they would do it.

Mr. Hogg: I fully agree with every word my hon. Friend has said. Of course the responsibility is ours, but I was addressing myself to the argument he previously presented, that businessmen who wanted to go in for this sort of thing ought to know where they stood. They were told where they stood. They were told that, if they attempted to avoid Ex-

cess Profits Tax, they would probably have to pay for it afterwards. If they were so stupid and such bad businessmen, in addition to being bad citizens, that they did not put the sum into a suspense account, I hope they do go bankrupt.

Mr. Craven-Ellis: I am inclined to think my hon. Friend is rather moving away from the Amendment. We are objecting to this being made retrospective because of the danger of bringing into review quite innocent people. This Committee will support the right hon. Gentleman against anyone who is definitely and illegally escaping his responsibility as a taxpayer, but when the inspector of taxes has had an opportunity of reviewing all the cases my hon. Friend has referred to, if he had the opportunity and has not taken it, why should he be given another opportunity by amending the Section now?

Mr. Hogg: I was replying to the argument presented by my hon. Friend the Member for Elland, and his clear contention was that, if a thing was legal, it ought to be allowed to stand. That is not a contention to which, in the circumstances of this case, I should think the Committee would give its adherence. I was proceeding to deal with the point raised by the hon. Member opposite. It is not necessary on this Amendment to go into the whole question of tax avoidance. Everyone knows that, for certain purposes, before the war and with certain people, Surtax had very largely become a voluntary tax, but that is not the question we are discussing now. We are dealing with Excess Profits Tax, and therefore, in view of the clear warning given from the Treasury Bench in 1941, different considerations can be held properly to apply. I greatly sympathise with the arguments against retrospective legislation produced by my hon. Friend the Member for Colchester. I do not think there is a Member of my party, and I doubt whether there is any Member opposite, who would not wholeheartedly agree in principle that retrospective legislation is tyrannical and bad. But I do not see that that argument is applicable to the present Amendment.
The point seems to me to be this. We are being asked to amend a Section of the Finance Act of 1941. Rightly or wrongly—it may well be my hon. Friend thinks wrongly—that Section was itself retros-


pective. It applied to all transactions the main purpose of which was to avoid taxation, or to reduce liability to tax, in respect of E.P.T. This Amendment does not propose to remove the retrospective character of the Section. What it proposes to do is something which will, inevitably, create an anomaly. The Clause of this Bill simply amends Section 35 of the Act of 1941 so as to substitute "one of the main purposes" for the original words, "the main purpose." Inasmuch as the two Sections will have to be read together so as to form a single amended Section, it makes the new Amendment retrospective, as the original Section has been retrospective from the first. What the Amendment does is to ask the Committee to pass a law which produces a single amended Section, part of which is to be retrospective and part of which is not. The part referring to the main purpose is to be retrospective from 1941, as it always has been, and the part that has been passed to-day is to be non-retrospective.
There are other canons of legislation besides one's natural dislike for retrospective legislation, and one of these is correctly stated by my hon. Friend the Member for Colchester when he makes a plea for clarity and consistency in legislation. It seems to me to be intolerable chaos to suggest that, where you have an amended Section which contains two phrases one of which reads "the main purpose of a transaction," and the second of which reads "one of the main purposes of a transaction," you should apply retrospective sanction to one and not to the other. For the reasons that I have given, I hope that in this case the Chancellor will End it proper to stand his ground.

Sir Adam Maitland: In a Debate which has included expressions of widely divergent views, I have found myself able to agree with something said by every speaker, and I have come to the conclusion that it is the method of approach to this question that will solve our difficulty, I subscribe to everything that has been said on the natural objection which most Members have to retrospective legislation. There is need for the greatest clarity of definition in our legislation, but in the case of Income Tax legislation that becomes merely a fond ideal. I still think that, in regard to this proposal, it is for the Govern-

ment to make clear that they have proved their case. I do not rely upon a statement made by Members on the Treasury Bench in years gone by that, if the circumstances were such as to prevent their purpose being effected, they would introduce new legislation which would be retrospective, as a justification for opposing this Bill. What we ought to do, is to ask the Chancellor to demonstrate the reasons why he now asks us to consent to retrospective legislation in this case. I think he will be able to show, from cases which have come before him, and from the experience that he has had, that his powers need strengthening.
On the question of whether or not it is necessary to go to the length of asking for retrospective legislation, the right hon. Gentleman is entitled to do so in the circumstances, if the need is there. I do not think we should be prevented from granting the powers, if he has demonstrated that he really needs them. It may well be that the actual enactment and the further enactment of retrospective legislation would be the finest weapon to use to prevent the recurrence of what we are all anxious to prevent. It is particularly important that the Chancellor's powers should be strengthened, in view of the very high rate of taxation that we are likely to have to bear for many years to come. As between taxpayer and taxpayer, I think the Treasury has a special responsibility to see that there is fairness and equity, which we are here to protect.
I am not much concerned about the retrospective effect of this proposal. I think that it is already inherent in the Section which it proposes to amend, but what concerns me is that in the very words of the Bill, if it stands as at present drafted, there are likely to be brought in the ambit of the Clause many people who ought not to be brought in. Therefore, while not objecting to the Chancellor standing firm, I hope he will be sympathetic to Amendments, particularly one in the name of the hon. Member for Oxford (Mr. Hogg), in order to confine the purpose of the Clause to those people for whom it is really intended.

The Solicitor-General: I felt that it might assist the Committee if I responded to the suggestion of my hon. Friend the Member for Faversham (Sir A. Maitland) that the Government should indicate why they consider that these powers are neces-


sary. I think that it is the logical approach and that most helpful to the Committee if I indicated shortly what was the history of the matter, because that has a direct bearing on our request for retrospective powers. The proposal put forward by the predecessor of my right hon. Friend was that the wording of Section 35 of the Act of 1941 should be that if one of the purposes was the avoidance of tax the Commissioners of Inland Revenue would have the right to give directions. That, as has been said by some of the speakers to-day, was opposed during the Committee stage of the Bill, and eventually the Chancellor agreed to accept an Amendment to substitute "the main purpose" for "one of the purposes." He indicated, however, his misgivings at accepting that weaker form of words, and said specifically:
I therefore accept the Amendment to-day with the warning that I may have to come back to the House and ask it to reverse its decision."—[OFFICIAL REPORT, 1St July, 1941; Vol. 372, c. 1277.]
The Financial Secretary to the Treasury went further, and said:
I will draw attention once again to what my right hon. Friend has said, namely, that if it is still found to persist in spite of these wide powers, he feels himself at liberty to take more strict action, retrospectively if necessary, because the one thing this House and the people will not tolerate is tax dodging in time of war."—[OFFICIAL REPORT, 1St July, 1941; Vol. 372, c. 1280.]
That was put forward quite clearly in the Debates on the Finance Bill in 1941, and the milder form of words was adopted making it necessary for it to be shown that it was the main purpose to avoid taxation before directions could be given to restore the taxation position. My hon. Friend the Member for Southampton (Mr. Craven-Ellis) and my hon. Friend the Member for Elland (Mr. Levy) have talked, a great deal about re-opening of accounts. I ask them to apply their own financial and business experience. That provision came into being and the Finance Bill passed at the end of June or the beginning of July, 1941. A period had to elapse when accounts would be examined by the Revenue. My hon. Friends will be the first td know the delay which occurs in making up accounts in these days through understaffing. The accounts were made up by the accountants and they then had to be submitted

and examined. The position was that the first cases began to come through the Special Commissioners about the beginning of 1943. It was thought right that we should see what was the flow and the nature of the cases before any action was taken. I do not think my hon. Friends who have opposed this Clause can criticise my right hon. Friend or the Inland Revenue for taking time to examine the flow of cases before they decided on action. That is the position, and it is really idle to say that in cases where people have used one of the tricks against which this Clause is aimed, where their accounts have had to be submitted and the matter taken up and discussed between them and the Revenue—it is idle to say that they are prejudiced to-day because, after an examination of a suitable number of cases, retrospective legislation is proposed.
I want the Committee to appreciate and to deal fairly with the arguments that have been put. My hon. Friend the Member for Colchester (Mr. Lewis) has said that the basis of the Committee being troubled with this matter was the advice that was given to the Chancellor. I am not going to weary the Committee by dealing with his quip about the Law Officers. I only ask him to realise that if the House is asked for a decision as a matter of policy, it is idle for him to say that that is a mistake as a matter of law. It is a mistake as a matter of policy which has been taken. Let us consider the position with which we are faced, and here I come to the point which my hon. Friend the Member for Faversham has made. He says, "Put your cards on the table and show us the problem you have to deal with." May I do that for a moment? Originally we had "the main purpose" was the avoidance of taxation. This is a sort of case we had to consider, and I shall give cases which have actually been before us. You have somebody who wants an increased working proprietor standard. He wants another working proprietor. He takes his son aged 16 or his daughter aged 17. He gives him or her 5.1 per cent. of the shares so that he will be within the original Section. He makes him or her a director of the company. When the direction is made he appeals to the Special Commissioners, and he says in his evidence, "There is nothing in my mind about an increased


Excess Profits Tax standard. It is my solemn assurance that I did that in order to introduce Johnny or Maggie into the business so as to give them the experience of the business that they require." The Special Commissioners, being scrupulously fair to the taxpayer, say, "This sounds a most extraordinary story, but here is someone who has assured us on the point and we must act on the evidence. We are not prepared to say that he is an utter liar. Therefore, we are not prepared to say that the main purpose was the avoidance of tax."
I have given that as an example. I could give 1,400 of that type of case. Let me come to another. You get some group of people who will buy companies and add £1,000 a year to their Excess Profits Tax standard. You have companies with some nominal activity like storing furniture in old mills and that sort of thing. People have acquired the shares of as many as 17 of these companies in order to get an extra £17,000 on their Excess Profits Tax standard and to avoid paying to the Revenue tax on that £17,000 each year. I am, not going into detail on these matters because I do not think any good purpose would be served. When people come forward in these circumstances and are prepared to assert, and to pledge their honour to it, that the main purpose was not avoidance of taxation, we must take steps to meet that, and we must take steps in accordance with the warnings given by my hon. Friend's predecessor, so that if these lenient words are abused he may come to the House of Commons and ask for words which can deal with the situation.
Some of my hon. Friends have put up the argument of legality. They have said: "The law permits you to do it, and if a man can bring himself within the four corners of the law by such devices, he should not be disturbed." I would just ask my hon. Friend the Member for Elland if he will take an example which I think is very much to the point. If any Member of this Committee were to see a child of five drowning in three or four feet of water, there would be no legal obligation on any of us to go into the water and wet our clothes; but what would be the view of any Member of this Committee of anyone who did not go in, in those circumstances? What would be the view

of someone whose motive for not going in was not merely to keep his clothes dry, but in order to get an advantage over those who had gone in and had wet their clothes? That is exactly the analogy here. People who carry out transactions such as those I have mentioned are not merely abstaining from going into the water of taxation in order to help their country, but, by their abstention, they are trying to get an unfair advantage over their competitors in the trade.
I hope I have demonstrated this matter to the satisfaction of my hon. Friend the Member for Faversham by the examples which I have given. When I have to deal with a situation of that kind, and, still more, to deal with the same problem of tax dodging in war-time, I have not the slightest hesitation in asking the Committee to approve of retrospective legislation. I agree with my hon. Friend the Member for Colchester as to the importance of certainty and practicability in tax legislation, but I know, he knows and everyone knows, that there is a section of a Community that is ready to indulge in tax avoidance in war-time. It is sufficient for their deserts that they receive a warning and that, if they do not take notice of that warning, legislation will be brought in. It is for that reason that I ask the Committee to reject the Amendment and to give us the Clause.

Mr. Muff: I rise to thank the Solicitor-General for standing firm. Whilst the hon. Member for Elland (Mr. Levy) was speaking, the hon. and learned Gentleman appeared almost visibly moved by the lachrymose eloquence of the hon. Member. Therefore, I am glad that he stood his ground. The Solicitor-General has given tax avoidance the right term, which is "tax dodging." In Yorkshire we call these things bluntly. If these people with the mentality of card-sharpers use their ingenuity every time a Finance Act is passed, to see how they can avoid its lawful demands, it is up to this Committee to see to it that they go through the process of regurgitation. I was reminded of the Walrus in "Alice in Wonderland" shedding his tears, while the people in the City of London proceed to swallow oysters of the largest size. As the Chancellor would say, in his more classical language, these people should "cough up."

Mr. Gallacher: I notice that there is a nice division of labour in the Tory Party, the old gang protecting the City, and the young gang protecting the vote. I fully endorse what has been said, and I was glad to hear the Solicitor-General's speech in regard to the behaviour of the financiers and the artful dodgers. I do not think anything can be strong enough or ruthless enough for such people as the big moneyed man whom hon. Members opposite try to protect and cover up. I am not opposed to retrospective legislation, and I do not think it should be allowed to go out that it is essentially evil. It can be very good and very desirable. If we see that injustice has been done, it is good to pass retrospective legislation which will remove the injustice. If there is evil, and we see it, it is good that we should pass legislation to deal with it retrospectively. True, it would be better, if we were all perfect, to be able to detect the exact and desirable thing at the moment; but when we are dealing with business men that is not possible. The hon. Member for Elland (Mr. Levy) had me all mixed up. He said he was speaking for the honest and honourable citizens. The next moment he said he was speaking for the business men. If the Chancellor of the Exchequer put anything into the Clause to exclude the honest and honourable citizen from this retrospective legislation, I am certain that it would not affect one of the business men, about whom the hon. Member for Elland and the hon. Member for Colchester (Mr. Lewis) are concerned.
I say that this Committee and this House must be prepared to take the most ruthless action against these tax dodgers. I remember the discussions we had in the early days of the war on this question. I remember very well the very strong line that was taken in regard to this question, the many exposures that were made, and the very people who are now objecting to retrospective legislation were the people who made it possible for the dodging to take place between 1941 and 1944. If they feel now the effects of retrospective legislation they have themselves to blame for the fact that they tried to find a loophole to continue dodging. There is nothing so criminal and despicable as moneyed men grabbing at every penny they can get, utterly regardless of the welfare of the country and of the sacrifices other people are making. I am very glad that the

Chancellor and the Solicitor-General are standing pat on this Clause.

Mr. Craven-Ellis: Not being a stranger to taxation, if I knew of any who was trying to evade their legal responsibility I would deal with them more ruthlessly than does the Chancellor of the Exchequer. I would like to put two points to the Solicitor-General. The first is this: He has stated his case for retrospective legislation, and it is true that the late Chancellor of the Exchequer gave a warning that legislation would be retrospective if the Revenue were satisfied that there was justification for it. Throughout the period from the 1941 Finance Act to date is it right or is it wrong to say that the Inspectors of Taxes have had every opportunity of questioning the accounts which have been submitted? Point number two is this: If the Inspectors of Taxes have had every right of querying accounts why have they not done it? Why come to the Committee and ask for retrospective legislation, to which even hon. Members opposite have expressed their objection if, in fact, the Inspectors of Taxes have done their job?
The Solicitor-General has quoted two cases. I really cannot conceive that it is beyond the ability of Commissioners to see that the two cases he has quoted are definite and deliberate evasions. It is a question of fact, not a question of law. He submitted two cases in supporting his argument, one of which was similar to a case put forward by the Attorney-General when he put forward the Resolution relating to this subject, and quoted the case of a boy of 14 years of age being made a director. Is it reasonable that a boy of such an age should be appointed a director? I think one question the Commissioners might well ask themselves is, Would that boy have been appointed a director at 14 years of age under normal conditions in peace-time? On the second case of buying 17 other companies, the same question might be asked. I do not care who examines them, when cases like that are put before people of commonsense I cannot conceive they would not decide there was evasion. Therefore, I submit that Section 35 of the 1941 Act give the Treasury and the Inspectors of Taxes every reasonable scope for protecting taxpayers who desire to be honest.

Commander Galbraith: Could the Solicitor-General tell us


whether the cases he has quoted went before the Special Commissioners, and were decided in favour of the taxpayer?

The Solicitor-General: In answer to my hon. and gallant Friend, I would say that is so. Let me deal with the specific questions put to me and I will willingly answer any other points from any Member of the Committee. The first question was, Why have not the inspectors "spotted this," if I may use the colloquialism? I thought I had made it clear that they had not only found these cases but had made directions which were piling up to the extent of thousands of cases.

Mr. Craven-Ellis: Directions against innocent people. That is the position.

The Solicitor-General: My hon. Friend says "innocent people." The position, first of all, is that under Section 35 the Commissioners of Inland Revenue may, if they think fit, in their discretion, make a direction the effect of which is that the tax position is restored to what it was before the transaction in dispute has taken place. It was under the Finance Act passed in July, 1941, that they first had the power to do it. They then inquired into a number of cases and have made directions in thousands of cases, and a vast number of these are awaiting appeal. Some have come to appeal. Therefore, to my hon. Friend's first question as to why it was not done earlier, I reply that it was done during 1942, when the accounts would be made up, and the cases began to come before the Special Commissioners at the beginning of 1943. A large number of cases came before the Special Commissioners. My hon. Friend the Member for Southampton (Mr. Craven-Ellis) has given us a graphic picture, and I have no fault to find with it, of the way his mind would work if he were a Special Commissioner. I can only tell him that of these cases the first class I gave—the abuse of working proprietors—account for 70 per cent. Of those cases the Crown lost a lot more than half, because the Commissioners were not prepared to say that it was not the main purpose when the taxpayer was prepared to state on his honour, or it may have been on his oath, that it was not the main purpose. That is the position. The Revenue lost a large number of cases because of that wording. We make no bones about that. A suffi-

cient number of cases have been dealt with in order to prove that point.

Mr. Craven-Ellis: Is it not a fact that the cases to which the Solicitor-General has now referred will never come under the retrospective legislation because having been before the Special Commissioners, they have now been decided and cannot be reviewed?

The Solicitor-General: My hon. Friend is quite right. I think I have said three times now, and I am sorry if I have to repeat it again, but I want it quite clear, that there are cases going into thousands. Of these thousands 70 per cent. fall into the first category of the abuse of working proprietors. Of that 70 per cent. a sufficiently large number of typical cases have been taken before the Commissioners to show what the result is likely to be in the many hundreds of cases that are left. I hope that is clear to my hon. Friend; I think it is clear to the Committee as a whole.
My hon. Friend's second point is, Why have the Commissioners come to that decision? I have endeavoured to explain that while it is quite true you can decide what a man's mind is by reference to the natural consequence of his acts you have also to pay attention to what he says was his main purpose. We have found that making the question depend on the main purpose, and therefore depend in turn on what the taxpayer says is his main purpose, simply does not work, because it produces the consequences I have mentioned, and results in these cases, of which I have given typical examples, being decided against the Crown and in favour of the tax avoider. My hon. Friend has said, "I have given two cases." I do not want to weary the Committee with cases, but there are over a couple of thousand cases which I could put in front of the Committee.

Mr. Lewis: I merely want to point out that the Solicitor-General has made his case rather worse. He now tells us that he has a number of these tax avoidance cases, of which some were selected to be taken to the Special Commissioners. He would not have selected the best cases, but some of the worst.

The Solicitor-General: There is no question of the Crown appealing to the Special Commissioners; it is only the taxpayer


who appeals to the Special Commissioners. Therefore, it is the taxpayer who selects the cases.

Amendment negatived.

Mr. Hammersley: I beg to move, in page 21, line 40, at the end, to insert:
any scheme of amalgamation approved by the Board of Trade shall be deemed to be outside the operation of this Sub-section.
The two main theses which appear to me to be true in connection with this Clause are that this Committee should not connive at tax evasion and that it should not connive at tax avoidance. I am sure that, although Members on the other side have tried to insinuate that this is a political matter, there is, in fact, agreement on all sides that tax avoidance is wrong, and that we should not assist tax avoidance in any way. At the same time, we do not want to interfere with arrangements which have increased British industrial output. For my own part, I agree that retrospective legislation is necessary. Every section of the community must bear a fair share of taxation, and we should not help any section which, having been warned, takes the risk of tax avoidance. In 1941 the net was cast, but it was not cast sufficiently wide. It has been found that there have been arrangements which have escaped legitimate taxation. There are the so-called director-controlled companies which create dummy directors, and new working proprietors are brought into the business to raise the standard of excess profits. We are told by the Solicitor-General that that accounts for 70 per cent. of the cases. Then there are share transactions. It is particularly with these share transactions that my Amendment is concerned. They have been classified as being: Births, that is the formation of new companies; marriages, that is the association of one company with another; and divorces, that is the division of one company into two. It is with some of these that my Amendment deals.
We are instituting offences in this Clause, and I suggest that we should try to define what the offences really are. We are now saying that any kind of share transaction may—not necessarily will—bring the taxpayer into jeopardy. I consider that that is a very unsafe kind of legislation. There are many trades in this country which, for post-war purposes, ought to be strengthened. They ought to have closer association between

various parts of the trade. Some want a stronger selling organisation, others want to be co-ordinated and amalgamated in their various producing sections. Any transactions of that kind which the President of the Board of Trade has himself specifically said are justifiable and necessary transactions, in the interests of British industry, will, as far as I understand, come within the net. It will be up to some inspector of taxes to initiate a direction, based on his judgment as to whether or not those transactions ought to come within the ambit of this Clause. In my judgment, the situation is so uncertain, and produces such a position for the taxpayer, or for those persons particularly concerned in the building up and strengthening of British industry, through amalgamation and methods of that kind, that we ought to look at it very carefully. For that reason, I and my hon. Friends have put down this Amendment. I do not know that we are particularly wedded to the precise form of words. I do not know that it goes quite far enough; but we feel very definitely—and I feel sure the 'Chancellor of the Exchequer will have sympathy with us on this—that it is an anomaly that many well-informed persons should be making proposals for the closer co-ordination of British industry and the amalgamation of various firms, while the Chancellor of the Exchequer, in the same Parliament, is introducing legislation which puts obstacles in the way. Therefore, I suggest that there should be words of this kind, or perhaps some recasting of the phraseology of the Clause, to make it perfectly clear that the people who are pursuing a desirable and necessary industry should not be placed in jeopardy when they find themselves engaged in these transactions, and I hope the hon. and learned Gentleman will find some form of words to make that quite clear.

Mr. Boothby: I do not want to do anything more than formally support the Amendment which my hon. Friend has moved so ably. Our object, simply, is to see that nothing is done in this Finance Bill to jeopardise the efficiency of British industry. It is quite obvious that, in certain cases, amalgamations will be urgently necessary, particularly those referred to in the Amendment, and I hope the Minister will be able to satisfy us.

Mr. Tinker: I take it that this Clause is to strengthen the measures to prevent tax dodging and that this Amendment will exclude some firms from the penalties of doing it. If the Amendment does not mean that, what does it mean? It is only to help these people who are trying to avoid payment of a legitimate tax, and I want to know what is the idea behind it.

The Solicitor-General: I think I have gathered the point and I will endeavour to explain it to the hon. Member for Leigh (Mr. Tinker) and the Committee, and, if I have not got it right, perhaps my hon. Friend will put me on the right lines. As I understand it, the position about which my hon. Friends are anxious is this. You have two companies, say, in the cotton industry in Lancashire, in whose case the Board of Trade has approved an amalgamation. Incidentally, you find that the different position of these companies with regard to Excess Profits Tax is such that the amalgamation does improve their E.P.T. position; so that, apart from carrying out a plan which the Board of Trade has approved, they will also improve their Excess Profits standard. I put it quite neutrally, and I hope the hon. Member for Leigh appreciates that; but of course, it may be, as the hon. Member for East Aberdeen (Mr. Boothby) would be the first to agree, that, if you have the amalgamation approved for production or marketing reasons, there may be cases where the motive would be that of getting the Excess Profits Tax improved standard and getting more money. If that were the position, it would be right for the Inland Revenue authorities to move; but suppose we take the case which the mover and seconder of the Amendment had in mind, the case where there is a real need for the amalgamation, for business reasons, but where, incidentally, it does improve the Excess Profits Tax standard. What is their position? Are they in jeopardy? That is what I want the Committee to examine.
In our new Clause we suggest changing the main purpose, or one of the main purposes, but, of course, it does not stop there, because, in the part of the Clause, which we have not yet reached—if you, Major Milner, will allow me to refer to it in advance for the purpose of argument—if the main benefit which ought to be expected is the avoidance of taxation then that is deemed to be the main purpose.

In the case which my hon. Friends contemplate, I should have thought they would have had no difficulty in saying that the main benefit to be expected from this amalgamation is increased production facilities, or increased marketing, or the like, or the rationalising of industry for the purpose of giving a better service to the community as a whole. If they do that, it gets them out. What is their difficulty? They make representations to the Commissioners of Inland Revenue, and the Commissioners have a complete discretion in the matter; "they do as they think fit," to use the words of the old Section. If they accept that point of view, and they do not make a direction, that is the end of the trouble for the hypothetical cotton company.
But if they do not accept that view, the company can go to Special Commissioners of Appeal and can say "It is quite true that you may find against us and think the main benefit to us is that the Excess Profits Tax standard would be increased in our favour, but still we have a right, under Sub-section (3) of Section 35 of the Act of 1941 to put to you that you, standing in the shoes of the Commissioners of Inland Revenue, ought not to make this direction. The Commissioners ought not to have made it, and you, as the reviewing body, ought not to make it." There is a perfectly independent body, trusted by the taxpayers after many years' experience, to review this matter and there should be no difficulty in putting it right. I think myself that the genuine company, the company that is making an amalgamation for production or marketing purposes, will be perfectly safe, and I am glad to think that these two points have been saved—the main benefit point, and, secondly, this appeal to the Special Commissioners, should it be necessary. I hope that I have been able to assure my hon. Friends that I appreciate their points, but I think, and this is the view held by my right hon. Friend, that they are in no danger from the Statute as it stands.

Mr. Hammersley: I think that the Solicitor-General has failed to appreciate the precise practical importance of this Amendment. He has pointed out that the matter goes first to the Commissioners of Inland Revenue and, secondly, by appeal, to the Special Commissioners. But, while this war is on, these companies are faced with a particular problem, and


I suggest to him that, as a matter of practice, these companies, who ought to be amalgamating now, will say, "No, we are not going to take the risk of going to Special Commissioners and have the whole of our taxation matters upset. We would prefer to refrain from entering into this co-ordination, because there is a piece of legislation on the Statute Book which is causing us trouble." The point which the Solicitor-General has failed to appreciate is that it is only now that these matters are important, when they have to pay their Excess Profits Tax. I put it to my hon. and learned Friend that it is a matter of practical policy which ought to be discussed with the Board of Trade. I ask him whether it is not putting on the Statute Book something which will interfere with necessary co-ordination in industry, and whether he cannot meet us in some way by a form of words which specifically deals with amalgamations which a Government Department thinks to be necessary. If the Government consider that amalgamations are desirable, they ought not to be prevented by a piece of legislation so vague that the Solicitor-General has to say, "Yes, vague as it is, you can get over it by a series of two appeals." I suggest that business people are not going to run the risk of two appeals, but will postpone their amalgamations.

Mr. Benson: Will the hon. Member explain what there is to prevent amalgamations, and what detriment there is? All that happens is that they are not allowed to make more profits than they made before the amalgamation.

Mr. Hammersley: The arguments in connection with the amalgamation are put before the various individuals concerned. They are arguments of an industrial character, indicating a better selling organisation or something of that kind, and involving an admixture of shareholding. In the admixture of shareholding the excess profits position of the various people concerned is affected. Some may be adversely affected and some advantageously affected. You are not going to get these two sets of people to enter into an arrangement if nobody knows what is to happen when the first year's results are examined, and there is a risk of the whole thing being upset and the taxation authorities coming on to the

people concerned. There may be such a situation, and I suggest as a matter of practical policy that people will not enter into these close associations unless they know where they are. Those associations which are first approved should be specifically outside the scope of the Clause. That seems to be a very reasonable suggestion.

Earl Winterton: Although I do not possess the great knowledge of my hon. Friend the Member for East Willesden (Mr. Hammersley) I have some knowledge of companies. His point is not a strong one; the answer of the learned Solicitor-General is absolutely airtight. My hon. Friend admits, as indeed the whole Committee admits, that this Clause is necessary, because all who have been connected with business on a large scale know that, though not in the case of the most reputable companies, there has been tax evasion on a large scale. The Government bring in a new Clause which receives universal commendation. My hon. Friend says that he agrees with the Clause, but it should not apply to companies where the amalgamation has been approved by the Board of Trade. Why should he put them in that category? Why should he say that because the Board of Trade has approved the amalgamation such companies should not be subject to the same conditions as any other amalgamation? I cannot see any reason for that, and in seeking to put them into a special category he will do an injustice to any company whose amalgamation took place at an earlier date. I say to my hon. Friend—he and I move in the business world—that it is a mistake to oppose this Clause or to suggest Amendments to it. It is a very fair Clause. Although there has been a little evasion of tax by disreputable companies, the reputable companies wish to see an end of it as early as possible.

Sir Patrick Hannon: I believe there is some substance in the Amendment of my hon. Friend the Member for East Willesden (Mr. Hammersley) notwithstanding what the Noble Lord has said. The reconstruction of industry may involve in the near future a reconstruction of companies. I want to know whether the Amendment will apply in cases of that kind. Amalgamations will be of the most elaborate kind, and they have to be carried out


with the approval of the appropriate Department. Is not that widespread process of reconstruction likely to be impeded by this kind of legislation? I would like some reply to be given on that point.

Sir J. Anderson: I would be the last person to wish to interfere with any rational process of reorganisation, but I think my hon. Friend, as well as my hon. Friend the Member for Southampton (Mr. Craven-Ellis), put the thing in a rather misleading light when he talked about obstacles being placed in the way. All that this Clause can do at the very worst, from the point of view of the firms concerned, is to leave them, as far as taxation is concerned, exactly where they would have been before. It may be that but for the Clause they might have improved their position, but why should they? Why should any improvement, if allowed, be limited, as my Noble Friend the Member for Horsham and Worthing (Earl Winterton) pointed out, to a particular category of transactions which happen to have the approval of some particular Department. There is only one other point I would like to make. Amalgamation under this Clause will not at the worst prejudice the position of those who enter into the amalgamation. At the best it may, as my hon. and learned Friend pointed out, if they had good luck with the Commissioners of Inland Revenue or the Special Commissioners, in some degree benefit them. I suggest that this Amendment might perhaps not be pressed.

Mr. Hammersley: I am not sure that hon. Members completely appreciate the point. It is argued that these companies should be neither better nor worse than any other companies, but that really is not the point.. The point is in the premise that it is desirable in the national interest that they should amalgamate. We introduce a piece of legislation in which any company amalgamating with another company has to run the risk of being subjected to this particular kind of taxation. That is my argument. I am suggesting that any amalgamation involving the transference of shares—I may be wrong, in which case my point will be done away with—and the ownership of shares affects the Excess Profits Tax position and as such, comes within the ambit of this very widely-drawn net.

Therefore, amalgamations have been given some kind of detrimental blow by this legislation, and that, in my judgment, ought not to be the case. I feel still that we are making a mistake, and if we are making a mistake, I do not see why I should withdraw the Amendment.

Mr. Benson: This Clause is drawn so widely that it affects not merely companies that amalgamate, but every company or business in the country paying Excess Profits Tax. If they take certain steps in which the major object is to reduce their payment of Excess Profits Tax, they come under this Clause. It does not merely affect companies that amalgamate. If any two companies amalgamate for a purpose other than tax avoidance they will not be affected by the Clause. It is only where it is obvious that the major object is tax avoidance that they are in any way affected.

Mr. Hammersley: I think that my hon. Friend is wrong. At the present time the result of amalgamations will be of benefit. It may be that the industrial benefit cannot be shown until after the war. It may well be that the only initial alteration will be of benefit to the tax position, although the objective is an industrial one. Therefore it may be argued that the main result of this amalgamation is tax avoidance.

Mr. Wilmot: Suppose the worst did happen when they came under the Clause, would not that be that they paid tax exactly as they would have done, if they had not amalgamated?

Sir W. Wakefield: Is not the point there that in that case they might not amalgamate, and the public advantage would not arise? Because they would have to pay more tax, they might not amalgamate, and therefore you would not have the industrial advantage which it is desired to encourage.

Mr. Wilmot: The argument being used is that the amalgamation is sought for purposes of national advantage and rationalisation of industry and not for tax reasons. If that is the purpose of the amalgamation, this Clause can do nothing to hinder the purpose, and, so far as the tax position is concerned, unless I am wrong about it, it can at the worst leave things as they were before the amalgamation took place.

Sir W. Smithers: I want to support my hon. Friend the Member for East Willesden (Mr. Hammersley) because there is nothing so bad for business and for the future of business, especially at this time, than uncertainty, and it is very difficult for one not a lawyer to understand these things. I should think, however, that an amalgamation would come under this Clause because it is a question of the main purpose. The Clause as amended says "the main purpose or one of the main purposes." Therefore, if one of the main purposes happens to be that they get off better under E.P.T., then the amalgamation will not go through. The uncertainty is there, and the proper rationalisation of industry, of vital importance now, will very likely be deferred because of this uncertainly, and that is against the national interest.

Amendment negatived.

The Chairman: Sir Waldron Smithers.

Mr. Quintin Hogg: On a point of Order. There are two Amendments, Major Milner, following, one in my name and one in the name of the hon. Member for Moseley(Sir P. Hannon) in almost identical terms. It would assist us if you could say whether you propose to call either of those Amendments, because, if not, what we have to say might be in Order under the present Amendment.

The Chairman: I propose to call both Amendments and to suggest that they might be discussed together.

Sir W. Smithers: I beg to move, in page 21, line 41, to leave out Subsection (3).
Sub-section (3) says that if the main benefit which might have been expected to accrue from the transactions in question was the avoidance or reduction of liability to tax, such avoidance or 'reduction shall be deemed to have been the main purpose. Thus, even though it was not, in fact, the main purpose, under this Sub-section it is, in certain circumstances, to be deemed to be so and an innocent person will suffer. The danger contained in Sub-section (3) is the main benefit which might have been expected to accrue from the transaction. I will ask whoever is going to reply to note this. It will be observed that no indication is given as to the person to be chosen as the one who might have had that expectation of benefit. Is it to be sufficient

if the Commissioners of Inland Revenue or one of their officials think that the main benefit which he would have expected was avoidance or reduction of liability to E.P.T. if he had engaged in this transaction? Secondly, is the test to be whether the taxpayer ought to have expected that the main benefit to accrue to him was avoidance or reduction? Thirdly, are the Special Commissioners of Appeal to decide whether they would have expected the main benefit to be avoidance or reduction if they had been engaged in the transaction?
Sub-section (3) contains a further danger. If the main benefit which might have been expected by someone to accrue was avoidance or reduction, there avoidance or reduction is to be deemed to be either the main purpose or one of the main purposes of the transaction. Accordingly, the question whether Section 35 should be amended as a whole, or in any given place, boils down to whether the main benefit that might have been expected by someone to accrue from the transaction was avoidance or reduction, because once that question is decided, all other questions arising under the Section, as amended, fall into their places and leave no room for any other question on this topic. For example, if the Special Commissioners of Appeal hold that the main benefit that might have been expected to accrue was avoidance or reduction then (1) avoidance or reduction is ipso facto a main purpose or one of the main purposes; (2) therefore the Section applies. I think we ought to be told in simple terms if that is so or not.

The Solicitor-General: I would like to do my best to deal with the difficulties of my hon. Friend the Member for Chislehurst (Sir W. Smithers) on this point because I appreciate the great attention he has given to this Bill and I really want to try to put the matter as clearly as I can to him. I do not want to repeat what I have already said, and the Committee will perhaps allow me to recall the gist of this problem as it has arisen in practice. It is that someone who has introduced as a new working proprietor into his business his son or daughter, aged 16 or 17, and has presented that child with 5.1 per cent. of the shares—

Sir W. Smithers: Would not that also be covered by the old Section 35?

The Solicitor-General: I was just going to explain to my hon. Friend how it is not covered. It is not covered because the person who has done that then comes forward and says, "I did not carry through that transaction in order to avoid paying Excess Profits Tax; I did it in order to introduce Johnny or Maggie into the business." Now when he comes forward and says that, he says, "That was my main purpose." If we alter it to make the test "One of the main purposes," he will still be able to say, "I did not know anything about Excess Profits Tax at all "; or else he will put it this way: "I knew there was some financial advantage to me which might be gained from it but that did not really weigh with me at all. That did not come into my mind. All I was thinking of was the historical connection of the Snooks' family with this company, which I was perpetuating by introducing Johnny or Maggie into it at this time." That is the position, and I assure my hon. Friend that that is the gist of the matter. It is because evidence of that kind has been accepted that we are asking for these powers from the Committee to-day.
We have to deal with a position where a financial benefit will obtain by avoidance of tax, and the taxpayer is either refusing to admit that that is the position or else saying that it had no effect on his mind. We say, bluntly, that any reasonable person ought to appreciate that if he transfers 5.1 shares to a youth of 17 and makes that youth a director he is carrying through that extraordinary transaction with financial benefit to himself. We ought to face that position and say that where the main benefit is a financial advantage it will be deemed to be one of the main purposes, and that hurdle will be overcome. My hon. Friend says, "Who was to expect that that was the main benefit?" That varies at each point. In Clause 3, first of all one looks at it with the mind of the person who carries through the transaction, and when it comes to the Commissioners of Inland Revenue, or the Special Commissioners, they have to decide it as a tribunal of fact. I hope I have made clear to the Committee what is our purpose in this Clause.

Major C. S. Taylor: Would my hon. and learned Friend give an example of a case where there might be financial benefit which would be re-

garded as innocent? Is there any such possibility?

The Solicitor-General: If my hon. and gallant Friend will not hold it against me I will do my best, although my example is not perfect. Take the case we were discussing a short time ago in the other sphere of amalgamation, a case where amalgamation was urged by the Board of Trade in order to improve the position of the cotton industry. It may be, as I postulated, that there was a financial benefit resulting, and the main benefit may be an improvement in the marketing and production of the two businesses. Therefore, that would be outside the Clause, because the main benefit would not be a financial benefit.

Major Taylor: Surely it may be deemed that one of the main benefits was a financial benefit.: Major Taylor: Surely it may be deemed that one of the main benefits was a financial benefit.

The Solicitor-General: If my hon. and gallant Friend will look at the words rather closely he will see they say:
If it appears … that … the main benefit which might have been expected to accrue from the transaction or transactions … was avoidance or reduction of liability to the tax, the avoidance or reduction of liability to excess profits tax shall be deemed … to have been the main purpose.….
A condition precedent to that is that it should be the main benefit.

Question, "That the words proposed to be left out, to the word 'be,' in page 22, line 3, stand part of the Clause, "put, and agreed to.

Mr. Quintin Hogg: I beg to move, in page 22, line 3, after "shall," to insert "unless the contrary 'be proved."
I do not want to take advantage of the example which the Solicitor-General has just given to the Committee, but I submit that this is an Amendment that can reasonably be accepted by the Government without prejudice to the Crown and with some advantage to the innocent taxpayer. Under the provisions of Subsection (3) of this Clause it is proposed to raise a certain presumption of the law with regard to the intentions in the mind of a person carrying out transactions of a particular kind. The question raised by the Amendment is whether that presumption should be an irrebuttable presumption or a rebuttable presumption. The Amendment, if passed, would have the effect of making it only a rebuttable


presumption. The Solicitor-General, in supporting the general terms of this Subsection, rightly says that it is necessary for the Crown to insist that a certain presumption should exist to assist the Special Commissioners in a case coming before them where a certain transaction has the result of reducing liability to tax. With that proposition I am in wholehearted agreement. It appears that in the absence of such presumption a number of persons whose intention it was to avoid tax should escape, and with such persons I can have no sympathy at all. The Crown says, "We will pass Sub-section (3), which provides that if any transaction has as its main benefit a reduction in liability to tax, or its complete avoidance, it shall be deemed that that will be one of its main purposes."
The criticism I have to make of that is this: It is true that in cases of this kind you cannot say effectively that a citizen is innocent until he is proved guilty. On the contrary, it is just, as the Crown proposes, that it should be presumed that a person understands the natural consequences of his acts, but it is not just that the Crown should say, "We shall presume he intends these consequences whether he intends them or not, and even on the assumption that he is able to prove by irrebuttable evidence that such was not his intention." That is going one stage too far. The Crown here is in a dilemma. The Solicitor-General may say that it is very difficult to see what explanation there could be in some cases, other than that of the intention of avoidance of tax. I put to him this dilemma: Either there are no cases at all in which a subject could conceivably be innocent of the intention to which he draws the attention of the Committee, and in that case there can be no objection to the Amendment, because, ex hypothesi, the Special Commissioners, as reasonable men, acting on the presumption, must inevitably find against the subject, or there are such cases in which it is presupposed that there is an injustice.

The Deputy-Chairman: It might be for the convenience of the Committee if this Amendment and the following Amendment on the Order Paper in the name of the hon. Member for Moseley (Sir P. Hannon)—

in page 22, line 3, to leave out 'deemed,' and to insert 'presumed until the contrary is proved'"—
were discussed together.

Sir P. Hannon: I support the Amendment. The whole point centres round the intention to evade tax liability or to secure a reduction of tax. In the industrial world people feel that, before a decision is taken, some value ought to be given to the evidence that can be produced. I realise the subtlety of dealing with the question of intention but, on the whole, I believe the arguments my hon. Friend has submitted ought to be accepted by the Government. It seems to be a real hardship that an innocent man who brings his case before the Special Commissioners will, under the Clause, be practically adjudged to have the intention of defrauding the revenue of tax before he can bring evidence in support of his contention. It is difficult to interpret a man's intentions and I agree that the law is embarrasing in that respect. Nevertheless, I think some cognisance ought to be given to the position of the innocent taxpayer. We know that where decisions have been given by the Special Commissioners in cases already heard the Clause will not apply, but what is to become of cases which have been before the Inland Revenue Commissioners and are now advanced to the Special Commissioners?
Until the Bill becomes law those cases, like Mohammed's coffin, are still hanging between heaven and hell. I am sure that, speaking for the large volume of industrial life, we should all repudiate any attempt to avoid tax or to reduce liability, because the other taxpayers will have to foot the bill, and anyone trying to evade taxation should be regarded as an enemy of the community. That is the attitude that I take up but, all the same, I think there is the danger in certain cases of submitting an innocent taxpayer to an ordeal in which he will be penalised without having an opportunity to rebut the accusation against him by evidence. My hon. Friend has handled the case with the skill and dexterity of a lawyer. May I recall what was said at a celebrated election at Bristol a long time ago? After Burke had made a brilliant and stimulating speech, his fellow candidate standing beside him said, "I say ditto to Mr. Burke." I say ditto to my hon. Friend.

Mr. Benson: This Amendment is a very subtle one and the position that it raises is rather more difficult to argue than Amendments previously raised. I rather suspect—I do not think the hon. Gentleman intends it—that it weakens the Clause. The first Sub-section deals with motive. The third gets away from motive and makes actual fact the main criterion as to whether a certain transaction shall or shall not come under the Clause. The right hon. Gentleman again reintroduces motive, in that motive has to be proved before the Sub-section is operative. He says that is perfectly reasonable, because the Special Commissioners are themselves reasonable men. I do not know who the Special Commissioners are. The Solicitor-General has given us a number of cases in which the decision of the Special Commissioners has been that certain persons have introduced their children, aged 16 or 17, and given them a special qualification, and they have persuaded the Special Commissioners that they have done it with a very obscure motive, certainly not the motive that the Commissioners themselves assumed. This is not the first time that we have had difficulty over the question of motive, and it is not the first time that the Special Commissioners have come to extraordinary decisions on the question of motive.
I believe the first time that motive was raised in regard to taxation was in the Finance Bill, 1936, with regard to the transfer of assets abroad. There was some hot discussion and we strongly opposed the motive test, and it was found in a couple of years that the motive test had to be very considerably strengthened. I remember that, when defending the strengthening of it, the Solicitor-General of the time instanced a type of motive suggested by the tax avoider and accepted as real and genuine by the Special Commissioners. I do not know whether the Special Commissioners are reasonable men. I rather suspect that they are a group of elderly maiden ladies who have been kept unspotted from the world. They seem so completely innocent and incapable of suspecting guile. I am afraid, once again, of introducing motive, particularly motive which has to be judged by the Special Commissioners, into this Subsection. We have only had two Sections of Acts dealing with taxation which rested on motive as far as I know. On both occasions they have broken down because

the Special Commissioners were so willing to take extraordinary motives as the real ones. The right hon. Gentleman is once again introducing this question of motive, because he allows motive to be proved in Sub-section (3) where, as it is drawn at present, it is fact and not motive. I hope the Solicitor-General will give us some assurance about the innocence of the Special Commissioners and will be able to show either that the Amendment does or does not weaken the Clause.

Major Taylor: I support the Amendment really for want of a better, because I should like to presume the individual innocent until he is found guilty, whereas the hon. Member who has just spoken would presume him guilty even if he can prove himself innocent.

Mr. Benson: That is not my position. My position is that, where you are dealing with motive, you are dealing with something that is incapable of proof, and it is much wiser to stick to the Sub-section, where fact and not motive is the criterion.

Major Taylor: If that is so, I see no objection to this form of words going into the Clause. The individual concerned would, under the Amendment, be presumed guilty unless he could prove himself innocent. I believe that is contrary to the usual principles of British justice hut, for want of a better solution, I would certainly support the Amendment.

The Solicitor-General: I should first like to deal with the point raised by my hon. Friend the Member for Oxford (Mr. Hogg). I think that the answer has really been given by my hon. Friend the Member for Chesterfield (Mr. Benson), that this is a substitution of main benefit for main purpose where the main benefit test can be applied. I would like, in deference to my hon. Friend's argument, to say that it is not a sound argument here that if there is an injustice it is only a little one, like the infant in "Mr. Midshipman Easy." Much though I respect the logicality of the position of my hon. Friend the Member for Oxford, I do not think that he can imagine many taxpayers who have introduced a child of 16 or 17 as a director and given him 5.1 per cent. of the shares, who are yet able to say that one of the main purposes in his mind was not the avoidance of Excess Profits Tax. I do not think my hon.


Friend can really imagine a case, but he is entitled to say to me, "It may exist." I say to him, suppose it does exist, suppose the Committee takes that pure and old-world attitude of mind which my hon. Friend the Member for Chesterfield is apt to deprecate in these Special Commissioners; suppose we imagine a person who carries out that curious transaction knows nothing about Excess Profits Tax. Is there any reason why he should benefit from it? I cannot see it.
Therefore, we really get down in this matter to the substitution of main benefit for one of the main purposes where you can prove it. If you cannot prove that the main benefit was the avoidance of tax, you are thrown back on proving that it was one of the main purposes. You have to prove it by acts, the sayings and the letters of the taxpayer in the case. But where you can prove it is the main benefit, whether or not the man is innocent—if it is possible to imagine an innocent person who has carried through this sort of transaction—or on the other hand, if he is guilty, I suggest that the only sensible approach is to be bold and make the substitution, and say that where you can prove that the main benefit was the financial advantage of avoiding taxation, that is enough and that stile is got over. I ask my hon. Friend to remember that that is only the first stile. A man has a perfect right to go to the Special Commissioners and say, "It was not the main benefit, or, even if it were the main benefit, this direction ought not to have been made having regard to all the circumstances of the case."

Mr. Hogg: I do not think we have had the worst of the argument, and before I ask leave to withdraw the Amendment, which I propose to do at a later stage, I hope to show why. The hon. Member for Chesterfield (Mr. Benson) accused us of being subtle. I see nothing subtle about the Amendment. I agree with my hon. and gallant Friend the Member for Eastbourne (Major Taylor); he is old-fashioned enough to think that a man is innocent until he is proved guilty. I think in this case he should be assumed guilty unless he can prove himself innocent. The Solicitor-General, supported by the hon. Member for Chesterfield, says that he must be

assumed guilty whether he is innocent or not. I see nothing subtle about that. The issues are perfectly plain. We are told that this is not a question of motive and that the Act, although it talks about motive, does not deal with motive. It substitutes a factual test for a test of motive. I cannot see why the Solicitor-General could not have said so if that was his intention. I do not share the hon. Gentleman's views about the difficulty of proving motives or intentions. No criminal case can be proved before the Assizes and practically no civil case without proving one way or the other—

Sir Edmund Findlay: What about the Milk Bill, which the hon. Gentleman condemned before it was tried?

The Deputy-Chairman: There is, definitely, not any milk to-day.

Mr. Hogg: It is clear that the issue whether a person intended something or not is tried in almost every criminal and civil court. The hon. Member for Chesterfield says that I am wrong in saying that the Special Commissioners are reasonable men and says they are maiden aunts unspotted from the world. It surprises me that a long career of dealing with tax dodgers has had such a purifying effect on these gentlemen. Even if it had, to proceed in this Committee on the basis that the court which the House has set up is not a reasonable court, is lunacy. If they are not reasonable men they ought not to be allowed to exercise their functions. Our argument must be allowed to proceed on the basis that they are reasonable. The Solicitor-General I thought rashly adopted an argument of the hon. Gentleman the Member for Chesterfield to the effect that this is a substitution of a factual test, a test of main benefit, for a test of motive. That is not what the Sub-section says. It says that in certain circumstances a person shall be deemed to have a certain intention.
This Clause is designed rightly to hit the tax dodger. What the Solicitor-General is really saying is that you shall be entitled to brand a man as a tax-dodger whether he is or not if only certain apparently relevant facts proved. That seems to me to be going too far. It is an unpleasant thing to be branded as a tax-dodger, and one should not be branded if one could prove one-


self innocent, even if one does not go the whole length of the hon. and gallant Member for Eastbourne. The Solicitor-General says that he cannot imagine an innocent case. I feel sure that if he carried his mind a few minutes back he could imagine one. We have been talking on the previous Amendment about a case in which the Board of Trade approved an amalgamation for quite a different reason, and it might very well be that the immediate benefit in such a case would be a financial one.

Mr. Benson: There is no question of "immediate" here; it says "benefit."

Mr. Hogg: It would be a question of fact for the Commissioners, which they would decide in different cases. But of those cases where amalgamations were approved by the Board of Trade, a certain number would be found to be innocent, but none the less, they would be cases in which the main benefit was a reduction in tax. I do not think the Solicitor-General's arguments are sufficiently powerful to persuade me that we have had the worst of the matter. In the circumstances, I beg to ask leave to withdraw the Amendment. It is clear that we are not going to get very much further with the Solicitor-General to-day.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Tinker: I want to put one or two points to the Solicitor-General. The intention of this Clause is to prevent tax avoidance. Before the Clause was strengthened; there were cases in which there were certain firms, who paid their directors £1,000 a year as salary. When amalgamations took place, those firms paid off the directors with a lump sum, giving them perhaps £5,000 or £10,000. The point that troubles is that those payments were not liable to tax, whereas the £1,000 salaries were liable, when paid, as they previously were, just like anybody's wages. The High Court has held that, as the law is constituted, taxation could not be charged on the lump-sum payments.
I would ask the Solicitor-General whether, now that the Clause is being strengthened, cases like that can be reexamined for the purpose of getting pay-

ment of tax from the people concerned. I am not accusing those men of being tax-dodgers, but it is evident that there has been tax avoidance because of a weakness in the law. Is that weakness to be put right now? There are many cases of that kind. I dealt with the matter fairly "fully on the Second Reading of the Bill, but the Chancellor of the Exchequer did not make any reference to my arguments. I would like to have an answer now, because the point is important. Perhaps I might read to the Committee a quotation from the "Financial Times" which I previously read to the House. It is as follows:
A lump sum payment to an employee, including a director, as compensation for loss of office, is not taxable. The reason is that the payment is in return for the giving up of the right to receive further annual profits, and is therefore capital. Where, however, the terms of a person's employment give him the right to a lump sum payment on termination, whether by resignation, death or any other cause, such payment is regarded as deferred remuneration and is taxable.
The subject of lump sum payments to directors was considered by the House of Lords, in February, 1943, in the case of Wales v. Tilley. A limited company agreed in 1937 to pay its managing director a salary of £6,000 per annum, and undertook, in the event of his ceasing to hold that appointment, to pay him a pension of £4,000 per annum for ten years, following such cessation. In 1938 a new agreement was concluded whereby the managing director agreed to release the company from its obligation to pay the pension and to continue to serve as managing director at a reduced salary; in consideration there for, the company agreed to pay him £40,000.
That shows the weak point of the law at present. I am asking for some kind of explanation from the Treasury Bench as to whether the alteration now being made covers up the weak points, whether these people will he responsible for tax and whether tax will have to be paid when such cases arise in the future.

Sir W. Smithers: I want to put forward a plea that the Clause does rope in innocent people. The late Chancellor of the Exchequer, speaking on this subject, said:
Finally, it has to be borne in mind that the assessing authorities for Excess Profits Tax are the Commissioners of Inland Revenue, and while they are not likely to attempt to apply the avoidance powers of Clause 30 to innocent. trading transactions they are.…."—[OFFICIAL REPORT, 1st July, 1941: Vol. 372, c. 1276.]
The real reason why the Inland Revenue now wants to amend Section 35 again


is not that there is something really wrong with the Section as it stands; but inspectors of taxes up and down the country, under instructions from Llandudno, have been making all sorts of extravagant claims under this Section 35. Then, when a taxpayer appeals, and wins, the Revenue immediately thinks there is something wrong with the Act, and rushes to the Law Officers of the Crown to have the Act amended, in accordance with their preconceived ideas of what it ought to provide. When things go against the Treasury, they come to this House to get stronger powers, but the taxpayer has not the same opportunity of introducing legislation, if the matter goes the other way.
The Solicitor-General gave us two examples; perhaps I might give two examples to match his. Some clients of a barrister friend of mine had shares in a company, to the extent of about 50 per cent, of the issued capital. They found that the holder of the other 50 per cent., who was one of their directors, had accepted a directorship on the board of a rival company. It would have been impossible for his clients to have conducted their business with somebody, sitting on their board, who was also a member of an enemy camp, and in order to get rid of him they had to buy his shares in the subsidiary company. That gave them a holding of well over 90 per cent. This conferred upon the people concerned an Excess Profits Tax advantage, but, from start to finish. Excess Profits Tax was never in their minds as one of the purposes of the purchase of the shares. All the facts were fully and frankly laid before the Revenue. They did not deny the facts, but nevertheless they made directions against the people, under Section 35 of the Finance Act, 1941. When they got before the Special Commissioners, the Commissioners had no hesitation in discharging the direction, but it had cost several hundreds of pounds in legal expenses to do it.
There are a number of other cases. I should like to mention one which is that of another barrister friend of mine, who at one time argued 13 appeals under Section 35 without losing one of them. In every case the Commissioners came to the conclusion that there was no evidence to support the view that Excess Profits Tax avoidance had been in mind. The Com-

mittee will see how the thin end of the wedge works in this kind of legislation. First of all it was introduced to stop tax-dodging, with which object we all agree. Then the Revenue seeks to apply it, where there has been no intention of tax evasion, or where that intention was a purely subsidiary one. They get defeated in the courts, and straightway come to Parliament and ask Parliament to accept a Clause, which deems tax evasion to have been one of the main purposes, even though in fact it might not have been. We are thus right outside the realm of deliberate tax evasion. Parliament is being asked to pass legislation to punish people who may be quite innocent. I could adduce further arguments, but I do not want to keep the Committee. I thank the Solicitor-General for the patience and kindness he has shown during this Debate.

Sir A. Gridley: I am afraid I cannot subscribe to the proposal that this Clause should stand part of the Bill. I desire to see the Clause omitted, not because there should not be a Clause 32, but in the hope that a better Clause 32 may be substituted for it. No Clause in the present Finance Bill has created more misgivings throughout the length and breadth of the country in industrial circles, than this Clause. It is all very well to hear arguments, that this is or this is not the intention of this Clause; that it will work this way, or that it will not work in that way. This kind of argument, as I am old enough now to realise, carries no weight, once one gets before a court.
If I may bring this home I would remind the Committee that we have passed and granted to Ministers during this war tremendous powers under the Defence of the Realm Act. One of those powers enables Ministers to take over companies and do pretty well what they like with them. The aggrieved company may take its case to court on the ground that the Minister has exceeded powers granted to him by this House. But what does the judge say? "It is not for me to consider whether the Minister has done something which is against the national interests, or against the interests of this company. All I am concerned with is; was he within his rights in taking the action he did according to the Order or Regulation?'' The judge may be entirely stopped from considering any other ques-


tion except whether the Minister has exceeded his powers or whether the action he has taken is within them. That is the way in which Acts of Parliament, once we have passed them, have to be interpreted by lawyers who act for or against a company.
Therefore, when an important Finance Bill of this kind is printed and circulated throughout the country, wise and prudent business men and others likely to be affected by it call upon their lawyers or chartered accountants, or both, for a report as to what effect certain Clauses in the Finance Bill may have upon them, and the future of their business, and the kind of transaction they may be asked to enter into or may consider entering into with other people. The result of the consideration that has been given in that way by learned members of the law, and the practised chartered accountants, is that a great many perfectly innocent transactions could have been carried out under Section 35 of the Act of 1941, which may be caught by this Clause if it goes through as it is. The position in which some of the perfectly innocent things which one might do under the Section, could, if the Clause were carried to its extreme limit, put an unfortunate company or employer, is absurd.
We have heard a great many arguments seeking to modify the Clause here and there. Some of the arguments I found myself in agreement with; others, had they been pressed to a Division, I should certainly have opposed. You get all sorts of conflicting opinions when you try to modify suitably a Clause of this kind. Some of us tried to see what Amendments we could put down, which would give the Treasury all the powers they needed to catch the man who was trying to be dishonest. As has been said, many times to-day, none of us wants to withhold from the Treasury for one moment, all the powers that may be necessary to catch the people who have been described as tax dodgers. But unless we have all the information at our disposal, which the Treasury and Inland Revenue officers have, we do not know who it is, or what class of trader it is, that it is essential to catch. We have heard to-day for the first time from the learned Solicitor-General that 70 per cent. of the many cases which the Treasury have had to consider, have been working partnership cases. I have

no doubt there is another percentage of another class. Can we have a modified Clause brought forward which will give the Treasury the powers they need to entrap those people? If such a Clause can be drafted, those of us who dislike the present Clause will certainly promise to give full, fair and a careful consideration to any substitute which can be devised.
I do not want, at this stage, to go over the arguments submitted on the various Amendments which we have disposed of. But I do ask if the Treasury, the Chancellor, the Solicitor-General and their advisers, will undertake to consider the matter between now and the Report stage, having heard from us here in this Committee and, as I well know, having learned from outside from other sources, the grave objections there are to this present Clause. If they will undertake to think again about this, if they will appreciate that there are many objections to the great width of this Clause as it now stands, and if they bring forward a modified Clause couched in such terms as will give them all the powers they really need, I am sure we will do everything we can to meet them in the difficult situation in which they find themselves. I do hope they will not insist on sticking to the letter of the Clause as it stands, but will endeavour to meet us so far as they reasonably can.

Mr. Hutchinson: I join with my hon. Friend the Member for Stockport (Sir A. Gridley), in inviting the Chancellor of the Exchequer to take this Clause back again and see whether he cannot devise a Clause which will give him the additional powers which he desires to have but which will be free from the objections to which this Clause is open. The Debate to-day has shown that this Clause does contain certain matters which are, generally speaking, repugnant to both sides of the Committee. [An HON. MEMBER: "No."] Yes, even my hon. Friend the Member for West Fife (Mr. Gallagher} was prepared to agree that retrospective legislation is, upon grounds of constitutional principle, a device which ought to be avoided as far as possible.

Mr. Tinker: The Clause may be repugnant to us but we think it is necessary in the circumstances.

Mr. Hutchinson: I do not disagree with my hon. Friend's intervention. That is


what I intended to convey. This Clause does contain certain matters which are, generally speaking, repugnant to both sides of the Committee. We all agree that retrospective legislation is an undesirable device to which recourse ought not to be had if it can be avoided. I think that we are all agreed that subsection 3, which means that every transaction must be regarded as a transaction which has for its main purpose the avoidance of tax, merely because the main benefit is the saving of tax, is a form of legislation which is also undesirable, unless it is essential. That being so, I invite my right hon. Friend to consider-whether he cannot take this Clause back again, having regard to the very strong objections which have been taken to it, both in this Committee and outside, and see whether it is not possible to devise a Clause which is free from these objections.
I listened with particular interest to my hon. and learned Friend when he was explaining the type of case which it is desired to bring within the scope of this Clause. It seemed to me that my hon. and learned Friend went too far in proving his case. The cases which he described were cases in which it was very difficult to see how the Special Commissioners could have come to the conclusion to which they were said to have come. I cannot help thinking that there must have been some evidence which justified the Special Commissioners in reaching conclusions which seem to be so completely out of accord with the facts, as my hon. and learned Friend gave them to us. Are the Inland Revenue going to be any better off in these cases if they get this Clause? Take these cases, where a young person is brought into a business at an early age, made a director, given an allocation of shares, and so on; yet it is held that the main purpose was not the avoidance of tax. It seems to me that the result in those cases would probably have been exactly the same if the Section had been worded in the way which is now proposed. My hon. and learned Friend gets over the difficulty by saying that, if the result of the transaction was the saving of tax, that shall be deemed to have been the main purpose, or one of the main purposes. I think that the sense of the Committee is against that sort of legislation, and, unless it is essential to bring the tax dodger within the ambit

of the tax, that is a type of legislation which ought to be avoided. I can see, and I am sure my hon. and learned Friend can see too, that if that is to be the criterion a great number of perfectly innocent cases will be 'brought within the scope of the tax, cases which were never intended to be brought with the scope of the tax at all. I would remind the Committee that, as was said earlier in the Debate, it is not only important to bring the tax-dodger within the ambit of the tax; it is equally important not to bring the person who is not a tax-dodger within the ambit of a tax which was never intended to apply to him. If the Clause goes into the Bill in its present form, that, undoubtedly, will be the result. I think that the sense of the Committee will be strong that, however desirable it may be to bring all the wrongdoers within the tax, it will be grossly unfair if we bring in someone who never was a wrongdoer, and to whom this tax was never intended to apply. I invite my right hon. Friend the Chancellor to look at this again, and to see, with the assistance of the law officers, whether it is not possible to devise a Clause which will be free from these objections.
I was one of those who added their names to the Amendment which was put down by my hon. Friend the Member for Stockport to leave out this par-particular Clause. That Amendment was not put down because we desired that those who have been evading their responsibilities should be allowed to go on evading them. We decided to put the Amendment down in that form, rather than as an Amendment to the Clause itself, because we felt that the only person who could devise a suitable form of words was really my right hon. Friend, and that private Members, not having knowledge of the type of case which he desired to bring within the ambit of the tax, could not be expected to frame suitable Amendments. I think that the Debate on the various Amendments which have been moved to-day shows that in that we were right, and that the only persons who can frame the proper Amendments are the Inland Revenue authorities, because only they have the necessary knowledge. Therefore, I invite my right hon. Friend to consider whether, in these circumstances, having regard to the difficulties which private Members have in amending legislation of


this sort, he and his advisers, before the Report stage, cannot devise some form of words which, while giving him all the powers which he considers to be necessary, will not be open to the very serious objections to which this Clause is open.

Mr. Wilmot: I have listened with very great care to the arguments of the hon. and learned Member for Ilford (Mr. Hutchinson), and I wonder if the Solicitor-General, when he replies, will make quite sure that we understand the meaning and effect of the Clause. As I understand, Section 35 of the 1941 Act gave powers to the Commissioners in certain cases to make directions, the effect of which, at the most, was to offset the tax advantage which had accrued to those who carried on the transaction. As I understood the hon. and learned Member for Ilford, he was afraid, and I can understand his fears, that this Clause might have the effect of punishing the innocent with the guilty.

Mr. Hutchinson: It will have that effect.

Mr. Wilmot: If it has that effect, I think it will be desirable for the Committee to oppose it; but does it have that effect? The innocent parties to whom the hon. and learned Member refers are surely only those who are amalgamating businesses for purposes other than the avoidance of tax.

Mr. Hutchinson: The effect of this Clause will be, as I understand, that every transaction which results in a saving of tax will be deemed to be a transaction the main purpose, or one of the main purposes, of which is the avoidance of tax. It is for that reason that I say that this Clause is bound to bring within its ambit a large number of perfectly innocent persons, to whom the tax was never intended to apply at all.

Mr. Wilmot: But in the case of these innocent persons, who did not attempt to get a tax advantage but some other advantage, is not the maximum effect of this Clause, at the worst, to deprive people who did not seek to get a tax advantage of the tax advantage for which they did not ask?

Commander King-Hall: I rise to make a few remarks in support of the point of view put by my hon. Friend

the Member for Leigh (Mr. Tinker). They will be brief, partly because of the hour, and also because I have some difficulty in seeing how the subject of compensation for loss of offices by directors is in Order under Clause 3, unless—and perhaps my hon. and learned Friend will deal with this point—it is allowable to charge up the cost of getting rid of redundant directors as a working expense for that year. If the matter is not covered by this Clause, I suggest that the Chancellor should look into this, because I see opportunities of evasion here by the device of appointing a director under a contract for 10 years, and then suddenly discovering that he is redundant and has to be compensated for loss of office.

Sir P. Hannon: I would like to make an appeal to the Chancellor. He has had, in the course of this Debate, many cogent, and I think clearly thought-out, reasons why this particular Clause should be reconsidered in order to meet the views of the Committee. It has always been the case, during the many years I have been in Parliament, that, when representations are made moderately and considerately to Chancellors and other Ministers of the Crown, and those views are supported by sound commonsense and evidence of factual merit, Ministers do take them into consideration and reconsider the structure of a particular Clause in a Bill. I am quite sure that the Chancellor must have been impressed by the speech of my hon. and learned Friend who sits beside me, who made a very substantial case far the reconsideration of this Clause. I know how strong is the sympathy of the Chancellor with the revival of industry after the war, which is one of the biggest problems of our time, and I would add that the generous consideration which he has extended to industry is generally appreciated by everybody connected with productive enterprise in this country. But I hope he will not endeavour to put into an Act of Parliament something which excites the suspicion of everybody who is liable to E.P.T. I hope he will not place the innocent taxpayer in the position of having to defend himself in every instance against the Commissioners. Nobody appreciates more fully than I do the reasons for the sound commonsense proposals he has made, and we all admire his statesmanlike actions since he took charge of the Exchequer.
We are all anxious to secure our economic stability in this country. I represent a very large number of small manufacturers, and the organisation of which I happen to be the head embraces 2,000-odd small manufacturers, and I think that, in justice to them, the Chancellor ought to see his way—indeed, I think the exchange of views in the Committee today would induce him—to reconsider the actual text of this Clause so as to meet the general wishes expressed throughout the Committee. Everyone of us wants to trap the fellow who is trying to evade the tax, but let not the House of Commons be a party to placing the innocent taxpayer in the position of having no opportunity to defend himself.

Sir P. Bennett: It is quite clear to every hon. Member that the Committee is agreed that the Treasury, having made up its mind that it cannot do its work properly, is asking for these additional powers, and it would be almost a Vote of Censure if they did not get them. What I am concerned about is giving the Treasury powers to do things which I am quite sure they do not intend to do. We have heard a great deal about amalgamation and directors' salaries, but I do not think it is realised that you cannot do anything today in the way of expenditure or of reducing your prices without affecting the amount of Excess Profits Tax that you will produce. I am concerned with matters which might be questioned, but which are quite legitimate, and with which I am sure the Revenue will not interfere, but which I am quite sure are not excluded by any form of words in the Bill.
Take the single case of advertising. It might be said, "What is the good of advertising your products to-day? You will not sell them." The war has been going on for five years and we have a short-memory public, and many business people feel that it is legitimate to spend an amount on advertising in order to keep their names alive as long as possible. There are slogans which have been in existence for some time and which are never questioned, but if those people stopped advertising for five years they would find that they would never establish their rights to them again. You must keep on expenditure which is not vitally necessary for the products of to-day or for the war effort. There is the scientific work that is being done, some of which you

cannot prove will produce results in the war period. It may be said, "That has been done out of Excess Profits Tax. You have no right to do it and we will charge it back." There is the extreme case: "Can I reduce the price to a Government Department without reducing the amount of Excess Profits Tax that I should pay?" These are things which I am certain that the Inland Revenue authorities feel, as we in business do, that as long as they are legitimate it is not tax evasion. It should be made clear that we are not to be told afterwards that, because we carried out business in an indirect way, we are dodging tax. The Chancellor should make that transaction perfectly clear.

The Solicitor-General: With the consent of the Committee, I would like to divide the few remarks with which I shall trouble them into two parts, and, first, to deal with the point raised by my hon. Friend the Member for Leigh (Mr. Tinker), supported by my hon. and gallant Friend the Member for Ormskirk (Commander King-Hall), which was rather beside the general stream of our argument—the question of compensation for loss of office. I would remind my hon. Friend the Member for Leigh of the position as it stands to-day. He has, if I remember his speeches correctly, had a look at the case of Wales and Tilley, which was decided in the House of Lords. There is a good example of the different sides of the line. The decision was that so much as was paid to Mr. Tilley as a lump sum instead of salary, which he would have got year after year, had to pay tax, but so much as was paid to him in substitution for his pension rights had not to pay tax. My hon. Friend is right in the view, which I am sure he has clear in his mind, that, if someone is paid a lump sum for giving up the right to a job of some sort, he is deemed to have parted with a capital asset in income rights, and, therefore, he receives that money free of tax and it is a capital payment. I am sure that my right hon. Friend will be only too glad to look into the problem which my two hon. Friends have raised. It is rather off the line of this Clause, and I do not think that my hon. Friend would ask me to say any more, except that we shall look into the disquiet which is obviously in their minds and consider the matter.

Mr. Tinker: I am satisfied with the assurance the Solicitor-General has given


to pay close attention to what has been said.

The Solicitor-General: I am very much obliged to my hon. Friend and have pleasure in giving him that assurance. Now I come to the question of the Clause, and I should like to deal together with the speeches of my hon. Friend the Member for Stockport (Sir A. Gridley), my hon. and learned Friend the Member for Ilford (Mr. Hutchinson) and my hon. Friend the Member for the Moseley Division of Birmingham (Sir P. Hannon). I will deal separately with my hon. Friend the Member for Edgbaston (Sir P. Bennett).
Let us try to look back at this Clause as we have all viewed it. Most of us here have heard a great deal of the Debate to-day and I think the vast majority are convinced that retrospective legislation was necessary. I will not put it higher than that; I will not say every one, but I think the vast majority are now convinced of that, in view of our problem. I think, again, that the vast majority are convinced that the old test of the main purpose would not do and we have to have a different test. Again, I think the vast majority of those who have followed it out are convinced that we have to have some factual basis like "main benefit" as being the true guide to the Comissioners as to what was the main purpose or one of the main purposes. That is the general basis of our approach, and I do not think that the majority of this Committee would welcome that my right hon. Friend should give way on these points.
Let us look at the Clause from another point of view. What are we really trying to hit by this Clause? I will endeavour to put it to the Committee. We are trying to hit, in the main, two forms of avoidance. In the first place, a change or changes in the person or persons carrying on the trade or business or part of the trade or business. That is putting in general language what I have said more than once to the Committee—misuse of the working-proprietor class of cases. That is the main thing we are trying to hit. We are also trying to hit the transfer or acquisition of shares in a company which produces increased advantage in respect of Excess Profits Tax. I want to be quite frank with the Committee and I think the Committee will acquit me of being anything else during the day, for

I have tried to put the point quite bluntly to them. These are undoubtedly the ones we are trying to hit. I think we are all impressed by the sort of points put by the hon. Member for Edgbaston. He mentioned matters such as advertising, prices and so on. I see his point of view. If he will allow me to paraphrase his words, "That is not the target you are aiming at; therefore, do not hit that target by mistake."
I abide by an old and true rule in legislation, that is: "Look at the law as it exists, look at the mischief which you are trying to cure, and then look at the best way of curing it." I am quite prepared—and my right hon. Friend authorises me to say this for him—to look at it from that point of view, to see that we are not going off the target. Equally, however, my right hon. Friend allows me to say this, that we are not departing from these three main bases which we think are necessary to cope with the two mischiefs which we think we have proved quite conclusively to the Committee. We are always prepared to consider legislation from the point of seeing that it is truly drawn to meet the evil with which we are dealing, but we are not prepared to flinch one inch from meeting the evil as we see it. On these lines we are prepared to consider the matter, and I hope I have made clear the sort of line on which we are prepared to consider it. I hope I have the general assent from all quarters of the Committee in considering it in that light.

Sir P. Hannon: Do we understand from what the Solicitor-General has said that, with the approval of my right hon. Friend the Chancellor, there will be some modified improvement in the text of the Clause?

The Solicitor-General: If my hon. Friend has in mind the question of the main benefit being deemed to be the main purpose it was not my intention to hold out any hopes of altering that. I wanted to indicate to the Committee that my right hon. Friend and I wanted to hit these two forms of evasion—the abuse of the working proprietor and the abuse of the transfer of shares. We are prepared to look at it from the point of view of delimiting our missile to hit that target, but I do not want anybody to have a false impression that we are prepared to go beyond that.

Mr. Colegate: I think that the Solicitor-General has satisfied us on a good many of the objections we felt, but I should still like to be quite clear. We have felt that this is rather like a photograph that is a little out of focus, and we would like a clearer picture. We are certain that the two evils he mentioned should be dealt with by retrospective legislation and defined and marked off so clearly that no other cases can come in. One thing that has not been mentioned to-day is that there are thousands of E.P.T. cases in arrear in the country, and the prospect of reopening them on the chance of catching one guilty man is a serious matter. I was glad to hear that that is not the intention of the Chancellor. I think it would help if the Solicitor-General would make it quite clear that he will produce on the Report stage some modification in the wording of this Clause which will make it clear that no innocent cases can come in.

The Solicitor-General: I do not like using loose terms like "innocent cases," because there may be different opinions about them. We are trying to hit the abuse of the working proprietor and the abuse of the transfer of shares. If I can get some words—and my right hon. Friend is prepared to consider this—which will direct the Clause more closely to these admitted evils we will do our best to do so. That is quite clear to those who have listened to the Debate, and that is what my right hon. Friend is prepared to do.

Sir W. Smithers: I am sorry, but I have not quite understood yet what the offer is. Is it that there will be a redrafted Clause on the Report stage, which will embody the points which have been put by my hon. Friends?

Question, "That the Clause stand part of the Bill," put, and agreed to.

Clauses 33 to 46 ordered to stand part of the Bill.

NEW CLAUSE.—(Increased house allowance to clergymen and ministers.)

In sub-paragraph (b) of paragraph (i) of Rule 2 of the General Rules (which provides, in the case of a clergyman or minister of any religious denomination, for the deduction from any profits, fees or emoluments of his profession or vocation of a part, not exceeding one-eighth, of the rent or annual value of a dwelling-house any part of which is used mainly and substantially for the purposes of his duty as a clergyman or minis-

ter for the words "one-eighth" there shall be substituted the words "one-quarter."[Mr. Brooke.]

Brought up, and read the First time.

Mr. Henry Brooke: I beg to move, "That the Clause be read a Second time."
We have been discussing very difficult matters for the last three hours and now we come to a relatively simple one, so I hope to have better fortune with it. It is a standing principle of our Income Tax law that a taxpayer is allowed to deduct from his gross income those expenses which are necessarily and exclusively incurred in the earning of that income. Clergymen and ministers, to whom the Clause refers, are affected because they have to have a place to work, and that place is normally also their own home, and for that reason the 1918 Income Tax Act provided that a clergyman or minister of any religious denomination should be allowed to deduct from his gross income an amount not greater than one-eighth of the rent or value of the house that he occupies, on the theory that an eighth of that house would be used by him in the performance of his public duties. I submit that we should reconsider that rather arbitrary figure.
I would not stand for any compassionate concession to the clergy as a class. It is not for us in Committee to discriminate between one class of person and another, however deserving we may think a certain class is. But, in the case of the clergy, that makes it all the more important that we should be perfectly sure that we are being fair to a body of people who perhaps less than any other are likely to agitate for alterations in the Income Tax law affecting themselves. Would anyone familiar with the inside of a manse or a vicarage seriously contend that a minister can enjoy the untramelled use of seven-eighths of his house for himself and his family and that only one-eighth of it is utilised for his public duties? He must have a study. In these busy days the study must be not only a place for reading but a working office, and there is no one in the whole community more than the clergy who has to keep his door open to anyone who wishes to call and see him. Those are the grounds on which, I submit, it would be reasonable to increase this allowance of one-eighth, to an allowance of one-fourth. That would be a


fairer and more accurate figure. The alteration would apply to clergy of all denominations. None of the denominational difficulties enter in here. I want to make clear beyond all doubt that in submitting this new Clause I am not asking for any concession to the clergy, but rather for the correction of an unfairness in the present law.

Sir Irving Albery: I put my name down in support of this new Clause mainly because I was unaware, until I found, to my surprise, that clergy were allowed only a reduction of one-eighth in the rateable value of their houses. Allowances are made in same other professions. I believe that barristers, for instance, are allowed a certain amount for the use of their private dwellings for work after office hours. The clergyman is in a different position from the barrister, for he must use his private dwelling to a much greater extent. I am influenced in my support of the new Clause by the fact that many of the clergy have houses on the large side which they use for all kinds of activities connected with the parish.

Major Mills: Speaking with the responsibility of a Church Estates Commissioner, I should like to commend strongly to the Chancellor this measure of justice, as my hon. Friend the Member for West Lewisham (Mr. Brooke) has proved it to be. It does not involve a very large sum, but it would be a great advantage to ministers and would be very welcome to them. I want to emphasise the point that there is no discrimination between the denominations and that any such discrimination would not be welcome to the Church Estates Commission or the Church of England itself. As regards its being a measure of justice, whether the rectory or vicarge or parsonage or manse be large or small, it is not only the office of the minister, but it is freely open to every member of his congregation almost any moment of the day or night to an extent which is far greater than is represented' by the one-eighth. No one knows this better than the wife of the minister. In these days, when domestic help is conspicuous by its absence, it is upon the wife that the duty falls of seeing that those rooms which are so freely put at the disposal of members of the congregation are in a fit and proper state, so

that the husband's position as minister may be properly upheld.

Mr. I. Thomas: I would like to support the arguments of my hon. Friends. The main consideration which I think the Chancellor should have in mind is that the house of a clergyman is really not his own. It is in reality a community house. It is used not only for the purposes of study, but for the reception of large numbers of visitors and for meetings of many kinds. It seems to me that one-eighth is a very small allowance, and is not comparable with allowances which are claimed by professional persons such as lawyers and doctors. As one who has been concerned in previous attempts to help the clergy I hope that the Minister will be able to accept this Amendment.

Mr. Magnay: I am sorry that I have not heard all the discussion on the Amendment, but I hope that the representative of the Treasury, who knows a great deal about this matter, will lend a favourable ear to the statements which have been made. I have for some time been what is called a circuit steward, having to look after four different ministers and their successors and to provide them with the wherewithal, etc. In the case in which I am particularly interested, in Gateshead, the minister's house was large and, in these days of lack of domestic service, might be called an encumbrance. The minister has no choice but has to take the manse which is provided. He has four ministers under him and 33 churches in his charge. He has to have an office and a telephone. It must not be forgotten by the Treasury and the Committee that such a minister has very onerous duties to perform. He is responsible for many of the marriages in the churches in his circuit. There are many hard cases where congregations are away, and funds are short, and I think it is only equitable that the Treasury should give this matter favourable consideration.

Mr. Turton: I wish to support this proposal. The farmer is allowed to deduct one-third of the annual value of his dwelling-house from his profits, for the purposes of Income Tax. I think that the proposed new Clause is modest in only asking for one-quarter.

Mr. Assheton: Last year I had the unenviable task of resisting an Amendment, which was very strongly supported, in


regard to the Easter Offerings of the clergy. I think Members were eventually convinced that the Chancellor of the Exchequer was right in the decision which he took. It is therefore all the more gratifying to me to be able to accept the proposed new Clause. It has been represented that the clergyman's study allowance should be increased from the present one-eighth, on the grounds that parsonage houses are now used more extensively than they were in the past. It has been represented by hon. Members that this would be a measure of justice. I think it is a measure of justice, and I have pleasure in commending the Clause to the Committee.

Sir E. Findlay: Does that apply to Scotland too?

Mr. Assheton: Certainly.

Question, "That the Clause be read a Second time," put, and agreed to.

Clause read a Second time, and added to the Bill.

Ordered:
That the Chairman do report Progress, and ask leave to sit agan."—[Mr. A. S. L. Young.]
Committee report Progress; to sit again To-morrow.

Orders of the Day — AGRICULTURE (MISCELLANEOUS PROVISIONS) BILL

Resolved:
That it is expedient that the Agriculture (Miscellaneous Provisions) Bill be committed to a Joint Committee of Lords and Commons."—[Mr. Toni Williams.]
To be communicated to the Lords, and their concurrence desired thereto.

Orders of the Day — GREEK WARSHIPS (MUTINIES)

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Young.]

Mr. Parker: I wish to raise a matter arising out of the answer given to a Question I had down on 9th May. With the Whitsun Recess and a very large number of bookings of the Adjournment ahead, it has meant that the opportunity to raise this matter has been considerably delayed. I would therefore like to point out to the House that the

original Question was to ask the Prime Minister:
why British Forces were used to disarm Greek ships in a British port after 95 per cent. of their officers and men had signed a memorandum urging the creation of a comprehensive National Greek Government of Resistance?
After receiving the Prime Minister's answer, I put a further question to him:
Can the right hon. Gentleman inform the House why we continue to intervene in Greek affairs, and support people who have no backing in Greece itself?"—[OFFICIAL. REPORT, 9th May, 1944; Vol. 399, c. 1708–9.]
In view of the Prime Minister's further answer I gave notice that I would raise this matter on the Adjournment. It is, I think, a little unfortunate that, in dealing with this matter, the Prime Minister has asked the Admiralty to reply rather than the Foreign Office. I have no personal objection, of course, to my right hon. Friend answering, but the point of raising the matter on the Adjournment is to deal not only with the actual mutiny but with the rather wider issues that led to the mutiny.
In dealing with the actual mutiny, I should like first to ask the Government what exactly has happened with regard to the mutiny. Has there been an amnesty with regard to the people concerned? Are the ships now in Greek hands and being manned by Greek sailors? Under whose command are they? Are they in definite service and in use at the moment? I would like also to deal with the rather wider question. I would say, of course, that like other hon. Members I welcome the information that was given about the attempt to create a National Greek Government to see that all Greek forces were united in fighting the common enemy. But the point I raised in connection with this original question and which I want to raise again now is, how far are the Government in this country, by their policy, helping the creation of a National Greek Government of resistance and helping our Greek Allies as a whole in the joint war against our common enemy, Hitler? I was very much upset to read a report, from the Associated Press correspondent in Cairo, this morning, which said that Mr. Papandreou, the Greek Prime Minister, has given the National Liberation Front, known as the E.A.M., a few more days to join the so-called Government of National Unity. Unless E.A.M. falls into


step it will be denounced publicly, he warned. The courts-martial on Greek soldiers and sailors involved in the recent mutinies in the Middle East will open next Monday.
I want to raise the point whether different treatment will be meted out to those who took part in the different mutinies in the Middle East, and those who took part in similar demonstrations to support the creating of a Greek National Government in this country. If there is to be an amnesty to the Greek sailors in this country, why has there not been a general amnesty to all Greek Servicemen who took part in demonstrations favouring a Greek National Government? Personally, I very much resent the interference which has continually taken place by our Government into Greek affairs, and the opposition which has been' shown in the past to attempts to create a Greek National Government; and I regret very much some of the remarks made by the Prime Minister in his recent speech, which seamed very anti-E.A.M. in sympathy.
This is all the more strange because the E.A.M. is very much less Communist in its leadership than is, for instance, the Tito movement in Yugoslavia. We have been told, in some sections of the Press, that the E.A.M. in Greece is a movement made up largely of looters and people of that kind; that it has to maintain itself on the people, by carrying out undesirable acts; and we have been told, on the other hand, that the Col. Zervas Group in Greece is all that could be desired. I would put the point that the group of Col. Zervas has been maintained by the British, by sending in supplies and munitions, and that, without that assistance, it would have disappeared. On the other hand, by refusing assistance recently, in food and military supplies and so on, to the E.A.M., we have forced that movement to collect for itself supplies in a country where they are very short, and we have, therefore, helped to give it the reputation of looting, and of taking supplies by force. I was particularly surprised that the Prime Minister rather held up favourably the troops of the Quisling Government in Greece, and stated that they were defending the country against looting by the National Resistance Movement.
I know, from my own experience, that Greeks, both in this country and in the

Middle East, want to fight the common enemy, and that there is a great deal of resentment at the disarming which took place, in this country and in the Middle East, of the Greek forces. Both here and in the Middle East, you had an impossible position. There was a feeling, among both officers and men, that they wanted a change of Government, and to be associated with the National Resistance Movement in Greece. It think it is very unfortunate that we took active steps to assist in the disarming of the First Brigade which had a very fine record of fighting against both the Italians and the Germans in Greece, and after it arrived in North Africa. The main difference we had with it was that it wanted to continue fighting but alongside the E.A.M., with a National Government in existence which it could support.
It seems particularly unfortunate that we ourselves supported the Greek camarilla in Cairo, in taking steps against them after the Americans refused to intervene. When we were asked to intervene, so sympathetic were our own troops to the Greeks that Indian troops mainly had to be employed in disarming them. The fact that 100 men were killed in that fight is a thing which has not been overlooked by Greek friends of this country, and, in carrying out this disarmament, both in this country and the Middle East, it seems to me that the Government themselves must take full responsibility. I would like to know whether they were fully consulted before these steps were taken here and in the Middle East, or whether it was carried out by officers in command without reference to higher authorities. There is much feeling also amongst Greeks that the fact that 100 Greeks were killed in that disarmament in the Middle East is not widely known here, while, at the same time, many references were made to another unfortunate event by the Prime Minister, in this House, when he accused the Liberation movement of having killed a particular officer of the British Mission with Colonel Zervas. The latter case he said was one of murder, but, in the other case, no explanation is given of what happened. It is very unfortunate that the Greeks compare these two things one with another and cannot understand the line taken by our own Prime Minister with regard to the unfortunate death of this British officer.
It is a fact that a court-martial was held, and that a British officer was on the court-martial. Also it is not generally known in this country that the court-martial reported and the verdict was unanimous that an accident had taken place, although it was due to the negligence of the Greek officer in command. There is a very big difference between an accident and murder, and no statement has been made in this country of the result of that court-martial. I understand that a new inquiry is to be held into the matter to elucidate further points, but the Greeks in this country very much resent the line taken by the Government in regard to this incident, and are setting one against the other—the killing of 100 Greeks when a brigade was disarmed and the unfortunate suggestion of murder to which so much reference has been made here. Greece is an ancient Ally and friend of this country and there is much resentment at the seeming interference of our Government in its affairs.
It seems to me that the Prime Minister has a very strong bias in this matter. He appears to have a passion for kings, and he seems to think that it is possible, at this late date, to carry out the late 19th century idea of planting the British idea of a constitutional monarchy in the Balkans whether the people in those countries want it or not. Surely, it is quite wrong that we should try to force our views of government on Greece. I would suggest that the Government of this country should cease interfering in Greek affairs and backing up those Greeks round the King, but that they should suggest, without enforcing their views, that the best way to attempt to create a Greek National Government is to have an amnesty, not only for the Greeks in this country but in the Middle East, and that only by having that amnesty carried out will you hold out any hope of a new National Government coming into being. Only in that way will there be a hope that the Greeks will be able to take their full part in the war for the defeat of Hitler. We take the view that it is very wrong for the British Government to back up one small group round the King and even, at this particular stage, by that action, perhaps, prejudice the attempt to create a really National Greek Government.
I would point out that, in the course of this war, we have seen the British Government accepting the views of national movements of resistance in different countries even though they were not in favour of them earlier. They did so in Yugoslavia with Tito, and they did so in Italy and very largely with the Free French, and I suggest that it is high time that they dropped these attempts to interfere in Greek affairs, because the national Greek movement of resistance is the main body responsible to the Greek people. They should do their best to work with them, so that we can get a real National Greek Government which would work with us, and, after the war, create a Greece friendly to this country. If that is done I have not the slightest doubt that we shall have our old friendship with the Greeks once more and have Greece fighting with us in the war, and as a loyal friend after the war. If not, we shall be building up great trouble for ourselves in the future and delay the winning of the war.

The First Lord of the Admiralty (Mr. A. V. Alexander): I regret the fact that my hon. Friend should have seen fit to raise this particular question at this time, and very largely on an ex parte statement, in this matter. The Greek position to-day is not represented purely by but by other groups as well. I am sure that my hon. Friend knows there was a very representative conference in Lebanon, when arrangements were made for all parties in Greece to come together in a Government of unity, making it clear that ultimately the people of Greece will decide for themselves what form of constitution and Government their country will get. Places are reserved by M. Papandreou for representatives of the E.A.M., although E.A.M. have not accepted them up till now. It is a great pity, with things at this stage, that this matter should be represented to the House in this purely ex partestatement. It is quite unreasonable. My hon. Friend made it clear at the outset of his speech that he had not anticipated that the unfortunate representative of the Admiralty would be called upon to reply to the kind of representations he was going to make to the House. Nevertheless, when I relate his remarks to what has occurred as far as the Navy is concerned, I still feel that it is perhaps


unfortunate that the matter has been raised in this way.
When Greece became a prey to Fascist attack, an attack as foul and wicked as anything in history, she had before her eyes, quite plain to her, a picture of all the other countries that had become the victims of Nazi and Fascist aggression. I think, looking back, the picture she had before her might well have meant that she would have quailed in front of it and not have been inclined to resist, and yet she decided, with her eyes open, most gallantly to resist. The Royal Navy, for whom I speak to-night, in common with the rest of His Majesty's Forces, came at once to her aid. This could only be done at the time at the cost of gravely weakening our operations in the Mediterranean and North Africa, which were then vital to our own safety. But we gave our aid ungrudgingly and without stint, although it did not avail to save Greece from being overrun. I do not think that any of us in this country have ever regretted, or ever will regret, the step we took to try and assist Greece. We are proud of the steps we took to help a brave nation. Our help was not limited to the manning of our own ships, but we lent to the Greek Navy several valuable warships to be manned by the Greeks themselves and to take their place side by side with us in their fight for life and liberty. In recent months there has been political dissension among the people of Greece. We all regret that. We went into the fight to bring the strongest possible organised force against the foe.
These differences in Greece, however, reacted on her armed forces, including her Navy. Mutinies began in the Greek Fleet and continued until numbers of Greek warships in the Mediterranean, were immobilised, including several of those vessels which had been transferred from the Royal Navy to the Greek Navy. At the end of the month the vessel which I think my hon. Friend had particularly in mind in the course of his remarks, which was in a British port in this country, was due to be recommissioned at Chatham with a Greek crew and to be renamed for transfer to the Greek Navy. On 24th April it became clear that there was considerable political unrest amongst the Greek officers and men at Chatham from whom the crew was to be drawn. Mutinies in the Mediterranean had begun in just this way, and we felt—and when

my hon. Friend asks who takes the responsibility, the Government take the responsibility—that the unrest at Chatham would almost inevitably develop into mutiny, particularly if the ship were sent to its natural theatre of operations in the Eastern Mediterranean.
I must repeat that the Greek mutiny which had already resulted in the immobilisation of several vessels on loan from the Royal Navy was very much in our minds. If we proceeded with the loan of this further vessel, it was clear that we might be faced with the immobilisation of still another valuable vessel. This was on the eve of the great assault on the Continent in which the Admiralty and the Royal Navy would bear a responsibility greater than at any time in history. At all times our responsibility for prosecuting the war effectively and bringing it to an end must come first in our minds, arid it must override all other considerations. We could not possibly at that time have run the risk of placing another destroyer in the hands of a crew who might at any time refuse duty, as their compatriots had refused duty in the Mediterranean, whilst under the operational command of the Royal Navy.
On 28th April instructions were accordingly issued, that the ship was not to be commissioned with a Greek crew but was to be commissioned under the White Ensign. Unfortunately, some Greek parties had already gone aboard and it was necessary for them to be told to leave the ship It was reported the same day, however, that the Greek officers and the ratings had been withdrawn without incident. In these circumstances there is no justification for speaking of the disarming of a Greek ship in a British port. The House will appreciate, I think, from what I have said, that our 'actions were dictated by operational reasons alone; they were dictated in the exercise of our great responsibility for the prosecution of the war. May I say to my hon. Friend, in view of what he said just now, that I think it would be a travesty to call that, or our other actions, an interference in Greek affairs? If there was any support generally going on in the earlier years of the war when Greece was with us, we have never done any more than support at the time the existing Government who had themselves resolved to oppose the German menace, and from that period onwards we have lent our aid at all times until quite


recently to those Forces who were fighting in Greece.
I feel sure my hon. Friend would not wish to suggest that right through the organisation of resistance in Greece E.A.M. have never had assistance from His Majesty's Government, because they have had it until a recent date when it was impossible to go on supplying arms in order that internal Greek factions might fight each other. That is a very different position from organising the unity of a nation in strength to go on, as it had previously, fighting the common enemy. Speaking for myself, I would be the first to pay my tribute to the past exploits of the Greek Navy. They have done very gallant work in this war. Think of the services of ships like the "Queen Olga" and the "Adrias." They have done magnificent service in a naval war and I would be the first to pay them a full tribute and a tribute to the generally noble part played by Greece in resisting Axis aggression.
As regards my own Department's view in the matter, may I say that, as the Prime Minister explained in the House in the recent Debate on foreign policy, the loan of this ship will certainly be reconsidered if, as we hope, the Greek Navy

returns finally to discipline and duty. I think I am entitled to hope very much from the amount of agreement already achieved at the Lebanon Conference and the fact that Greek ships abroad now are manned by Greeks, that soon they may be brought up to their full strength and made fully operational again. At that time I. would be only too glad to consider recommending His Majesty's Government to allot another ship in place of the one which was commissioned under the White Ensign instead of under the Greek flag. I beg my hon. Friend, instead of raising the matter as he has done to-day, putting purely one point of view on statements which it is almost impossible for him to check fully, because they come from ex parte sources, to lend us his aid in getting the Greek people united behind the Government to be formed as a result of that conference in Lebanon, a Government which will represent all parties and will march shoulder to shoulder with us in the common cause against the enemy, and will leave that nation completely free to decide for itself its own form of Constitution and Government when the common foe has been defeated.

Question, "That this House do now adjourn," put, and agreed to.